For UK and EU expats living in France, assurance vie remains one of the most popular investment and wealth-planning vehicles. While often translated as “life insurance,” assurance vie is a unique form of life insurance that combines investment opportunities with inheritance and tax advantages, distinguishing it from traditional life insurance policies. However, not all assurance vie contracts are the same. When comparing a French assurance vie with a Luxembourg assurance vie, key differences emerge in tax efficiency, investment range, language accessibility, and the level of investor protection.

This guide explains how each jurisdiction structures its life assurance policy, what advantages and drawbacks each presents, and which may better suit internationally mobile investors.

Understanding the Core Difference

Both French and Luxembourg assurance vie contracts allow investors to hold a wide range of assets within a tax-efficient wrapper. Yet, their legal frameworks and investor safeguards differ substantially.

A French assurance vie is issued under French law and supervised by the Autorité de Contrôle Prudentiel et de Résolution (ACPR). It is most often provided through French banks or domestic insurers, but various financial institutions, including banks and insurance companies, offer assurance vie products, each with different investment options. The insurance company is responsible for managing the policy, crediting returns, and maintaining reserves, especially for products like Fonds en Euros and structured bank deposits.

In contrast, a Luxembourg assurance vie operates under Luxembourg law and is regulated by the Commissariat aux Assurances (CAA). The structure is designed for cross-border investors, offering greater flexibility, neutrality, and asset protection. An investment manager may be appointed to oversee the selection and management of assets within the policy, allocating funds into various investment products to optimize long-term growth.

Tax Efficiency and Flexibility

Taxation in France

For residents of France, French assurance vie contracts are well-established and enjoy favourable domestic tax treatment. Profits are only taxed when withdrawals are made, with assurance vie taxed according to French tax rules on withdrawal gains. After eight years, generous allowances apply; note that the threshold for these allowances is determined by the total premiums invested, not the current contract value. In some cases, certain withdrawals may qualify as exempt income, and such exempt income must still be reported for compliance purposes. This makes them attractive for residents who plan to remain in France long term.

However, French policies are not portable. If you move abroad or hold multiple tax residencies, the administration becomes complex. Moreover, because they are bank-held, investment options are often limited, and total costs can be higher than those of an open-architecture Luxembourg policy.

Luxembourg’s Tax Neutrality

Luxembourg assurance vie contracts are tax-neutral, meaning taxation depends on the investor’s country of residence. This makes them ideal for expats who move between jurisdictions, as the same policy can adapt seamlessly without restructuring.

Compared to French policies, international av policies like Luxembourg assurance vie offer greater flexibility and advantages for mobile investors, ensuring compliance and ease of management across borders.

Luxembourg assurance vie can also serve as an alternative to the French equivalent product, especially for expatriates seeking similar tax and inheritance benefits.

For international investors or mobile professionals, this continuity provides simplicity and consistent compliance, regardless of where life takes them.

The Triangle of Security

One of the biggest advantages of a Luxembourg assurance vie is the Triangle of Security. This unique system ensures that client assets are held in segregated custodian accounts at a CAA-approved depositary bank. The regulator oversees these accounts daily, ensuring that the insurer’s assets and client assets remain completely separate. Additionally, the insurance company’s reserves act as a financial buffer to support the guarantees provided, helping to smooth out returns and maintain capital security even during market volatility. Tax authorities also impose annual social charges on certain secure investment products, such as Fonds en Euros, due to their perceived safety, which can impact overall returns.

In France, while insurers are reputable and solvent, bank-distributed policies do not provide the same level of segregation. Investors’ assets are pooled within the insurer’s balance sheet, meaning the degree of protection is lower in the event of a failure. Poor management of these pooled assets can further increase risk for investors, highlighting the importance of choosing reliable financial institutions and advisors.

For clients prioritising capital preservation, Luxembourg’s approach offers superior transparency and peace of mind.

Investment Range and Currency Choice

French assurance vie policies traditionally offer access to fonds en euros (capital-protected funds) and a limited selection of unit-linked investments. Some policies also include collective bond funds and unit linked investments, which may be tied to the stock market or government bonds. As most are distributed by banks, the menu of available funds is often restricted to in-house products or a narrow range of approved external funds. This can lead to less diversification and higher embedded costs. The investment return and future investment returns of these funds are generally stable but may be lower compared to more diversified options.

By contrast, a Luxembourg assurance vie operates on an open architecture model. Investors can choose from thousands of global funds, discretionary portfolios, and structured notes. Luxembourg policies allow investors to access a wide range of financial markets and appoint an investment manager with a specific investment mandate. It also supports multiple currencies including EUR, GBP, USD, and CHF, making it a preferred option for cross-border and international investors. The broader investment range can offer higher potential investment return and future investment returns, depending on the selected fund types.

In many cases, Luxembourg policies provide access to institutional share classes with lower management fees, resulting in better long-term value than the more limited and costlier French equivalents.

Investment Strategy

Developing a robust investment strategy is essential when using an assurance vie to achieve your financial goals, whether you are a French resident or an international investor. The right approach not only helps you grow your wealth but also ensures you take full advantage of the significant tax benefits and tax efficiency that assurance vie policies offer.

A key first step is to define your financial objectives and assess your risk profile. Are you seeking long-term capital growth, regular investment income, or a balance of both? Your answers will guide the selection of investment vehicles within your assurance vie, such as mutual funds, bond funds, or unit-linked investments. Each option carries its own level of investment risk and potential for tax-deferred growth, so it’s important to choose a mix that aligns with your comfort with market volatility and your desired outcomes.

Working with a financial adviser can make a substantial difference. An experienced adviser will help you navigate the complexities of assurance vie policies, ensuring your investment strategy is tailored to your needs and optimized for tax efficiency. For those seeking a hands-off approach, appointing a discretionary fund manager allows your portfolio to be managed professionally, with a focus on maximizing returns while minimizing income tax and capital gains tax liabilities.

The premiums paid into your assurance vie also play a crucial role in determining the tax treatment of your investments. By structuring your contributions strategically, you can benefit from features such as the tax-free allowance and the flat tax rate on investment income after the eight-year holding period. French residents, in particular, enjoy significant tax advantages, including the ability to benefit from tax-deferred growth and, in some cases, tax-free withdrawals within certain limits.

Assurance vie offers a wide range of investment options, from capital guarantee products that provide security against short-term market volatility, to structured bank deposit offerings designed for more sophisticated strategies. Diversification is key, spreading your funds across different asset classes and investment vehicles helps reduce risk and supports more stable long-term growth.

It’s also important to stay informed about the relevant tax laws and regulations, such as the rules around joint taxation and the impact of the eight-year holding period on your tax rate. A financial adviser can help you navigate these complexities, ensuring your assurance vie remains a tax efficient investment product throughout your investment journey.

In summary, a well-crafted investment strategy for your assurance vie should focus on:

• Understanding the tax benefits and advantages of assurance vie, including tax-deferred growth and income tax efficiency
• Carefully selecting investment vehicles, such as mutual funds and bond funds, that match your risk profile and financial objectives
• Considering the impact of premiums paid on the tax treatment of your investments
• Appointing a discretionary fund manager for professional, tax-efficient portfolio management
• Diversifying your portfolio to minimize investment risk and manage short-term market volatility
• Staying up to date with tax laws and regulations, including the eight-year holding period and joint taxation rules
• Working with a financial adviser to create a tailored, tax efficient investment strategy that supports your long-term financial goals

By taking these steps, you can make the most of the tax advantages and flexibility that assurance vie offers, ensuring your investments are well-positioned for future growth and financial security.

Language and Accessibility

A major practical difference lies in language. French assurance vie contracts are exclusively in French, and all correspondence, reporting, and legal documents must follow French language conventions.

Conversely, Luxembourg assurance vie contracts can be drafted entirely in English, and most service providers offer bilingual or multilingual client support. For English-speaking expatriates, this makes ongoing management, tax declarations, and compliance far easier and less prone to misunderstanding.

Minimum Investment and Suitability

French assurance vie policies can often be opened with modest sums, sometimes from just a few thousand euros. They suit domestic residents who want a simple, euro-based savings plan managed through their local bank.

A Luxembourg assurance vie typically requires a higher minimum investment, reflecting its enhanced regulatory protection, international scope, and institutional quality. The total investment amount can also influence the fees and expenses charged, making these policies more suitable for investors with larger portfolios who can benefit from the cost structure and additional features. For wealthier investors or those with assets across currencies and borders, this higher entry point is justified by broader diversification and stronger safeguards.

Cost Comparison

While it may seem intuitive that a domestic French contract should be cheaper, the opposite is often true. Bank-distributed French assurance vie policies tend to include multiple layers of management and entry fees, as investors are confined to the bank’s proprietary products or limited fund lists.

A Luxembourg assurance vie, by contrast, is usually more transparent, offering clear pricing and access to wholesale fund classes. This can significantly reduce overall costs over time and improve performance. For many expats, the combination of lower fund fees, better diversification, and greater flexibility makes the Luxembourg option more cost-effective in the long run.

Who Should Choose Which?

• French Assurance Vie: Best suited for residents who plan to remain in France, have smaller sums to invest, and prefer simplicity through their local bank, even if the investment range is limited and costs are higher. Note that age restrictions may apply to policyholders or beneficiaries, which can affect the tax treatment and ability to maximize inheritance benefits.
• Luxembourg Assurance Vie: Ideal for internationally mobile individuals or families, those with assets in multiple currencies, and those seeking English documentation, stronger asset protection, and broader fund access. This option offers significant inheritance advantages, allowing you to pass assets to as many beneficiaries as you wish, often with favorable tax treatment and reduced inheritance tax exposure.

FAQs – Luxembourg Assurance Vie vs French Assurance Vie

What is the main difference between Luxembourg and French assurance vie? Luxembourg offers international flexibility, segregated asset protection, and open investment architecture. French contracts are typically bank-held, more limited, and locally focused.

Is Luxembourg assurance vie more tax-efficient? Yes. Luxembourg policies are tax-neutral, meaning taxation is applied according to your country of residence, allowing seamless cross-border use.

Are Luxembourg assurance vie contracts cheaper? In most cases, yes. They offer access to institutional funds with lower fees and no bank mark-ups, unlike many French contracts.

Can I hold my assurance vie in pounds or dollars? Yes, Luxembourg policies support multi-currency investments. French assurance vie policies are usually restricted to euros.

Can Luxembourg assurance vie contracts be in English? Yes. They are fully available in English, whereas French contracts are strictly in French.

What are alternatives to assurance vie for short-term savings or tax-free accounts in France? If you are looking for alternatives to assurance vie, especially for short term savings, France offers several tax free accounts such as the Livret A and LDDS. These accounts are designed for short-term financial goals, provide tax-free interest, and are ideal for building an emergency fund or saving for upcoming expenses. In contrast, assurance vie is better suited for medium- to long-term investments with tax advantages over time.

Working with a Cross-Border Financial Adviser

At Harrison Brook, we specialise in advising expats across Europe on the most efficient and transparent investment solutions. Our advisers understand both French and Luxembourg assurance vie structures, ensuring clients select the right option for their residency, objectives, and investment profile.

We also collaborate closely with tax specialists and regulated portfolio managers, ensuring every policy is compliant and optimised for cross-border financial planning.

Speak to an Adviser

If you are considering opening, transferring, or reviewing your assurance vie, contact Harrison Brook France today for a free consultation. Our team will help you understand which structure, French or Luxembour, best suits your personal and financial circumstances.