Supplementing Your Retirement Pension with Scheduled Withdrawals

Francoise's profile: a recent retiree with an insufficient pension

Francoise is 63. After a 38-year career in local government, she has just retired. Her net pension amounts to 1,850 euros per month, a 40% drop from her last salary of 3,100 euros net.

Widowed for 5 years, Francoise lives alone in an apartment she owns outright (no rent or mortgage). Her monthly fixed expenses amount to approximately 1,200 euros (co-ownership charges, insurance, food, energy). She estimates she needs 2,400 euros per month to maintain her standard of living and enjoy her retirement (travel, leisure, occasional help to her grandchildren).

Her assets

• Primary residence: estimated value 220,000 euros
• Life insurance #1 (Linxea Spirit 2, opened in 2010, 15 years of maturity): 185,000 euros including 55,000 euros in capital gains. Current allocation: 50% Spirica euro fund, 30% Amundi MSCI World ETF (CW8), 20% SCPI Epargne Pierre.
• Life insurance #2 (Lucya Cardif, opened in 2018, 7 years): 42,000 euros including 7,000 euros in capital gains. Allocation: 60% euro funds, 40% diversified ETFs.
• Livret A: 18,000 euros
• Current account: 4,500 euros

Her objective

Supplement her pension by 550 euros per month (i.e., 6,600 euros per year) for at least 25 years, while preserving capital for estate transfer to her two children.

Why Francoise made good contract choices

Francoise opened her main policy at Linxea Spirit 2 (Spirica) 15 years ago and her second at Lucya Cardif (BNP Paribas Cardif) 7 years ago. Both choices are wise for the retirement phase:

Both policies charge 0% in withdrawal fees (unlike some bank-based policies that charge up to 1%), which is essential for a supplementary income strategy.

The strategy implemented

Step 1: Prioritize withdrawals from the Linxea Spirit 2 policy (the oldest)

The Linxea Spirit 2 policy, opened in 2010, has over 8 years of maturity. Partial withdrawals therefore benefit from the 4,600 euro annual tax allowance on gains for a single person. This policy will be drawn from first.

The Lucya Cardif policy, with only 7 years, will be left untouched until it crosses the 8-year threshold in 2026. It will continue to compound in the meantime, serving as a reserve for estate transfer.

Step 2: Gradually secure the allocation of policy #1

At 63, Francoise can no longer afford significant volatility on the policy funding her income. She reorganizes the allocation of her Linxea Spirit 2 policy:

• 60% in Spirica Nouvelle Generation euro fund (111,000 euros): capital security, 2024 return of 3.13%. This is the pocket that finances monthly withdrawals without risk of capital loss.
• 15% in SCPI Epargne Pierre (27,750 euros): 2024 return of 5.28%, regular income compounded. 100% distribution rate on Linxea Spirit 2.
• 10% in SCPI Primovie (18,500 euros): 2024 return of 4.52%, resilient healthcare/education sector.
• 15% in Amundi MSCI World ETF (CW8) (27,750 euros): maintaining a performance engine for the long term, to offset inflation over the next 25 years.

The estimated overall return is 3.70% net of management fees.

Step 3: Calculate the taxable portion of withdrawals

On the Linxea Spirit 2 policy, the gains/total capital ratio is: 55,000 / 185,000 = 29.7%.

For an annual withdrawal of 6,600 euros, the gains included in each withdrawal amount to: 6,600 x 29.7% = 1,961 euros of gains.

The annual allowance is 4,600 euros for a single person. The 1,961 euros of gains are therefore fully exempt from income tax.

Social contributions of 17.2% still apply to the gains: 1,961 x 17.2% = 337 euros per year.

Total annual tax cost: 337 euros for 6,600 euros of supplementary income, an effective rate of only 5.1%.

For comparison, had Francoise invested in direct SCPI with her 30% tax bracket, the annual tax on 6,600 euros of rental income would have been: 6,600 x (30% + 17.2%) = 3,115 euros, an effective rate of 47.2%. Life insurance saves her 2,778 euros in tax per year.

Step 4: Set up scheduled withdrawals on Linxea Spirit 2

Francoise configures scheduled partial withdrawals of 550 euros per month with Spirica (insurer of Linxea Spirit 2), automatically debited from the policy. The transfer arrives directly in her bank account on the 5th of each month, like a pension supplement.

Withdrawals are made primarily from the euro fund (to avoid disinvesting unit-linked funds during downturns), then proportionally from other funds if the euro fund is insufficient.

Monthly income schedule:

• Retirement pension: 1,850 euros (transfer on the 1st of the month)
• Scheduled withdrawal Linxea Spirit 2: 550 euros (transfer on the 5th)
• Monthly total: 2,400 euros (objective achieved)

Step 5: Keep the Lucya Cardif policy compounding

The Lucya Cardif policy (42,000 euros) is left untouched. It continues to compound with a moderate allocation (60% euro funds / 40% diversified ETFs). In 2026, it will reach its 8-year maturity, offering a second source of tax-optimized withdrawals if needed.

Role of the Lucya Cardif policy:

1. Emergency reserve: if Francoise needs an exceptional withdrawal (home repairs, health expenses), she draws from this policy rather than increasing regular withdrawals from the Linxea Spirit 2 policy.
2. Estate planning tool: eventually, this policy will be transferred to her children via the beneficiary clause.
3. Insurer diversification: having two different insurers (Spirica and BNP Paribas Cardif) protects against the risk of insurer failure (a very unlikely but prudent scenario).

The numbers: how long will the capital last?

Central scenario with a 3.5% net return

The Linxea Spirit 2 policy starts at 185,000 euros. Francoise withdraws 6,600 euros per year while continuing to benefit from a 3.5% return on the remaining capital.

Remarkable result: after 25 years of withdrawals, Francoise will have received 165,000 euros in supplementary income and still have approximately 155,000 euros remaining on her Linxea Spirit 2 policy. The return on capital largely offsets the withdrawals. Adding the Lucya Cardif policy (estimated at ~70,000 euros after 25 years of compounding), her total life insurance assets would be 225,000 euros at age 88.

Pessimistic scenario: 2% net return

Even with a poor 2% return, the capital on Linxea Spirit 2 lasts well beyond 25 years. At age 88, more than 149,000 euros would remain across both policies.

Optimistic scenario: 4.5% net return

With a 4.5% return, the capital grows despite withdrawals. At age 88, Francoise would have capital exceeding her initial amount, an ideal situation for estate transfer.

Year-by-year tax optimization

Each year, Francoise verifies that the gains portion in her withdrawals does not exceed the 4,600 euro allowance. As withdrawals proceed, the gains/capital ratio evolves:

• In the early years, the ratio is 29.7%, so gains in each withdrawal (1,961 euros) remain well below the allowance
• If the policy generates new capital gains, the ratio may increase gradually
• Francoise adjusts withdrawal amounts if necessary to stay below the exemption threshold

Tax tip #1: if an exceptionally good year generates strong gains (e.g., +15% on the ETF pocket), Francoise can temporarily reduce her withdrawals from Linxea Spirit 2 and draw from Lucya Cardif (which will have passed the 8-year mark in 2026) to stay below the overall allowance threshold.

Tax tip #2: Francoise makes withdrawals primarily from the euro fund, whose gains are lower than those of unit-linked funds. This minimizes the gains portion in each withdrawal and maximizes use of the allowance.

The PER option: what Francoise could have done as a complement

Had Francoise known about the PER earlier, she could have optimized her strategy further. Here is what she could have implemented in the years before retirement:

Accumulation phase (ages 55-63, last 8 working years): Contributions of 5,000 euros per year to a Linxea Spirit PER, deducted from taxable income (30% TMI, yielding a 1,500 euro annual tax saving). Dynamic allocation: 70% Amundi MSCI World ETF + 30% euro funds. Estimated accumulated capital: approximately 50,000 euros.

Transition phase (ages 63-65): Gradual withdrawal from the PER as fractional capital payments to supplement income, alongside life insurance withdrawals.

Lesson for future retirees: Combining PER (tax deduction during working life) and life insurance (optimized supplementary income in retirement) is the most effective strategy. The earlier you start funding both wrappers, the greater the capital available at retirement.

The estate planning component

Francoise has two children (Pauline and Thomas). Her beneficiary clauses are precisely drafted:

Linxea Spirit 2 policy: "My children, Pauline Durand and Thomas Durand, born respectively on [date] and [date], in equal shares, failing that their descendants by representation, failing that my heirs."

Lucya Cardif policy: Same beneficiary clause.

In the event of death, each child will benefit from the 152,500 euro allowance on capital transferred via life insurance (for premiums paid before age 70). Nearly all of Francoise's capital having been contributed before age 70, the transfer will be very largely tax-free.

Estate transfer projection:

• Linxea Spirit 2 policy (hypothetical death at age 88, central scenario): ~155,000 euros, i.e., 77,500 euros per child (entirely exempt as < 152,500 euros)
• Lucya Cardif policy (central scenario): ~70,000 euros, i.e., 35,000 euros per child (entirely exempt)
• Total transferred outside the estate: ~225,000 euros, with zero inheritance tax

Planned adjustments over time

• At age 70: Review the Linxea Spirit 2 allocation to increase the euro fund portion to at least 75%. Reduce the ETF pocket from 15% to 5%. Maintain the SCPI (Epargne Pierre and Primovie) which continue to deliver stable income.
• At age 75: Check whether withdrawals need to be increased to offset inflation. If the cost of living has risen by 2% per year, the 550 euros of 2026 will only be worth the equivalent of 450 euros in purchasing power at age 75. Increase withdrawals to 650 euros per month if necessary.
• If a significant one-off need arises (home repairs, health expenses): make an exceptional withdrawal from the Lucya Cardif policy rather than increasing regular withdrawals from the Linxea Spirit 2 policy.
• In case of dependency: the remaining capital across both policies (estimated between 149,000 and 340,000 euros depending on the scenario) can fund home care (housekeeper, home aide: 1,500 to 3,000 euros per month) or nursing home accommodation (2,000 to 3,500 euros per month out-of-pocket).

Key takeaways

Francoise's case demonstrates that a well-managed life insurance policy -- with performant, low-fee contracts (Linxea Spirit 2 at 0.50% and Lucya Cardif at 0.50%) -- can serve as a genuine retirement supplement:

• Scheduled withdrawals of 550 euros per month supplement her pension at minimal tax cost (5.1% effective tax rate vs. 47.2% for direct SCPI)
• Thanks to the 4,600 euro allowance, virtually all withdrawn gains escape income tax
• The balanced allocation (60% Spirica euro fund + 25% SCPI Epargne Pierre/Primovie + 15% ETF CW8) delivers an estimated 3.5% return that largely offsets withdrawals
• After 25 years of withdrawals (165,000 euros received), 155,000 euros still remain for estate transfer
• The second policy (Lucya Cardif, 42,000 euros) serves as an emergency reserve and complementary estate planning tool

The key point: life insurance is not merely a savings product; it is also a formidable supplementary income tool in retirement, provided you have planned ahead and chosen quality contracts with controlled fees and over 8 years of tax maturity. For those who have not yet started, it is never too late: every year of tax maturity gained is precious.

This article is published for informational purposes and does not constitute personalized investment advice. Past performance does not guarantee future results. Projections are based on return assumptions that may not materialize. Before making any investment decision, consult a qualified financial advisor.