Incorporate crowd-funding in your Luxembourg life insurance
While Luxembourg life insurance has many points in common with French life insurance it has some specific features which make it a particularly suitable investment solution for larger portfolios and for savers who wish to diversify their assets.
1. Luxembourg life insurance: various investment possibilities
Luxembourg life insurance stands out from other life insurance policies thanks to the great management flexibility. Indeed, the variety of units of account is limitless and can include unlisted investments such as real estate crowd-funding.
2. What is real estate crowd-funding?
Real estate crowd-funding (or participatory financing) enables individuals to group together to finance the equity for a real estate transaction. These investments are short term (12 to 24 months) and present a dynamic yield between 7 and 10%* per year, net of cost. These financings boost the promoter's own funds, enabling him to unblock his bank credit limits and launch his project. Finally, at the end of the transaction, the investor receives his capital and interest.
Note, crowd-funding is an investment regulated by the Autorité des marchés financiers (AMF) and each platform must have certification which guarantees to investors that it complies with French law.
3. What are the advantages of such investments?
In France, the real estate crowd-funding sector raised more than €500 million in 2020. This underlying trend can be explained by the various advantages of this investment type:
- A dynamic return of between 7% and 10% per annum*;
- A shorter maturity than direct investments in private equity (12 to 24 months);
- The opportunity to invest in real economy, by supporting real estate development companies in France.
- No investment management.
Also, certain platforms do not charge their investors with any management, entry or exit fees. An aspect to be taken into consideration in your investment strategy.
4. Investing through a Luxembourg life insurance policy
Investing in real estate crowd-funding through a Luxembourg life insurance policy has several advantages:
- The insurance policy is a capital accumulation scheme. The returns are thus accumulated in the policy free of income tax provided there is no surrender;
- The level of protection is higher since the policyholder is a first rank creditor;
- The company supports individuals internationally by tailoring their policy to their country of residence, so that they benefit from all its advantages;
- Tax neutrality: there is no withholding tax in Luxembourg and the policy is subject to the tax in the policyholder's country of residence.
5. Regulatory eligibility criteria in Luxembourg
In order to invest in these unlisted investments, certain criteria must be met. The larger the policyholder’s assets, the greater the opportunity for investment in unlisted bonds. These rules are set out in Circular 15/3 of the Luxembourg Commissariat aux Assurances.
* Past performance is no guarantee of future performance
A Luxembourg unit-linked life insurance policy offers multiple possibilities when it comes to the underlying assets. One of these possibilities is to invest in real estate crowdfunding. This underlying asset is similar to a non-listed asset and must therefore comply with certain criteria set out in circular 15/3 of the Commissariat aux Assurances.