Contributions Before/After 27 Sept. 2017: Which Rules Apply

27 September 2017: a pivotal date for life insurance

The Finance Act for 2018 introduced the Prelevement Forfaitaire Unique (PFU) applicable to investment income, including life insurance gains. 27 September 2017 is the date chosen to distinguish between old and new contributions. This date corresponds to the day the Finance Bill was presented to the Council of Ministers. The legislator's aim was to prevent large-scale contributions made between the announcement of the reform and its entry into force on 1 January 2018.

This date has become one of the most important in life insurance taxation. For savers holding older contracts funded both before and after this date, it creates considerable calculation complexity, with two tax regimes coexisting within a single contract. Understanding this distinction is essential for optimising withdrawals and avoiding paying more tax than necessary.

Why this distinction?

The pre-PFU tax regime was based on the prelevement forfaitaire liberatoire (PLF), whose rates were degressive with the contract's age (35% before 4 years, 15% between 4 and 8 years, 7.5% after 8 years). The reform simplified the system by introducing a single rate of 12.8% (30% including social charges), while preserving the acquired rights of savers who had made contributions under the former regime.

This is why gains attributable to contributions made before 27 September 2017 retain the option of being subject to the former PLF regime. More importantly, for contracts over 8 years old, these older contributions benefit from the 7.5% rate without the 150 000 euro ceiling introduced by the reform for new contributions.

Tax regime for contributions made before 27/09/2017

For contracts under 4 years old

Gains can be subject, by election, to the PLF at 35% (excluding 17.2% social charges), or to the PFU at 12.8%, or to the progressive income tax scale. The PFU at 12.8% is almost always preferable to the PLF at 35%. The progressive scale may be attractive for taxpayers with a TMI of 0% or 11%.

For contracts between 4 and 8 years old

The PLF at 15% (excluding social charges) applies by election, or the PFU at 12.8%, or the progressive scale. Again, the PFU at 12.8% is generally more advantageous than the PLF at 15%.

For contracts over 8 years old

The rate of 7.5% applies (PLF or PFU), together with the annual allowance of 4 600 euros (single person) or 9 200 euros (couple). This 7.5% rate applies with no contribution limit for sums paid in before 27/09/2017.

This last provision constitutes the major difference from post-cutoff contributions: older contributions benefit from the reduced 7.5% rate after 8 years regardless of the total amount contributed, without the 150 000 euro cap applicable to new contributions. A saver who contributed 500 000 euros before 27/09/2017 to a contract over 8 years old will see all their gains taxed at 7.5% (after allowance), whereas a saver who contributed the same amount after that date would see part of their gains taxed at 12.8%.

Tax regime for contributions made after 27/09/2017

For contracts under 8 years old

The PFU at 12.8% applies by default (+ 17.2% social charges = 30% in total). The option for the progressive scale remains available via box 2OP on form 2042. The PLF is not available for these contributions.

For contracts over 8 years old: the 150 000 euro threshold

This is where the 2018 reform introduced additional complexity. The tax rate depends on the total amount of contributions made across all life insurance contracts held by the taxpayer:

• Total contributions of 150 000 euros or less: rate of 7.5% (after the 4 600/9 200 euro allowance)
• Total contributions above 150 000 euros: rate of 12.8% on the gains corresponding to the portion exceeding 150 000 euros (after allowance)

The 150 000 euro threshold is assessed per taxpayer and not per contract. A married couple therefore has 150 000 euros each, or 300 000 euros in total.

How the insurer apportions the gains

When a withdrawal is made, the insurer must determine the portion of gains attributable to old contributions and to new contributions. The apportionment is done pro rata to the respective contributions. This process is automatic: the insurer applies it when calculating the IFU and the withholding at source.

The example of Geraldine, 68, former HR director

The case of large portfolios: the 150 000 euro threshold in practice

Example with threshold exceeded

Monsieur Bertrand holds 250 000 euros of contributions made after 27/09/2017 across all his contracts (all over 8 years old). He withdraws 40 000 euros of gains.

Applying the allowance (single):

• Gains after allowance: 40 000 - 4 600 = 35 400 euros

Apportionment according to the 150 000 euro threshold:

• Gains corresponding to contributions up to 150 000 euros: 35 400 x (150 000 / 250 000) = 21 240 euros at the rate of 7.5%
• Gains corresponding to contributions above 150 000 euros: 35 400 x (100 000 / 250 000) = 14 160 euros at the rate of 12.8%

Income tax calculation:

• 21 240 x 7.5% = 1 593 euros
• 14 160 x 12.8% = 1 812.48 euros
• Total income tax: 3 405.48 euros

Social charges: 40 000 x 17.2% = 6 880 euros

Total tax: 10 285.48 euros

If all 250 000 euros had been contributed before 27/09/2017, income tax would have been 35 400 x 7.5% = 2 655 euros, a saving of 750.48 euros. The difference between the two regimes becomes more pronounced as the amount of post-2017 contributions increases.

Impact of holding mixed contributions

If Monsieur Bertrand had made 100 000 euros of contributions before 27/09/2017 and 150 000 euros after, the gains from old contributions would be entirely taxed at 7.5% (no cap), while only the gains from new contributions would be subject to the 150 000 euro threshold rule. This configuration would be more favourable than a profile of exclusively post-2017 contributions.

Optimisation strategies

1. Preserve older contributions

Contributions made before 27/09/2017 benefit from a more favourable regime after 8 years (7.5% with no cap). It is therefore preferable, where possible, to withdraw first from contracts funded exclusively after that date, in order to preserve the stock of older contributions and their tax advantages.

If the contract contains mixed contributions (before and after), the gains withdrawn are automatically apportioned pro rata. It is not possible to choose to withdraw only gains attributable to new contributions.

2. Do not exceed 150 000 euros of new contributions

For savers approaching the 150 000 euro threshold for post-27/09/2017 contributions, it may be wise to:

• Diversify into other tax wrappers: PEA (income tax exemption after 5 years within a 150 000 euro contribution limit), standard securities account (attractive if the TMI is low)
• Split contributions between both partners: each benefiting from a 150 000 euro threshold, a couple has 300 000 euros of capacity at the reduced rate

3. Maintain accurate contribution records

Insurers provide the apportionment details on the IFU. However, for multi-contract holders (several contracts with different insurers), the taxpayer must verify compliance with the 150 000 euro threshold across all their contracts.

It is recommended to maintain a summary table with, for each contract:

• The insurer's name and contract reference
• The opening date
• The amount of contributions made before 27/09/2017
• The amount of contributions made after 27/09/2017
• Any partial withdrawals made (total amount and capital portion)

4. Use the Pacte transfer to preserve contribution dates

Contract transfers carried out under the Pacte law (Article L. 132-21-1 of the Insurance Code) preserve the original contract's tax seniority, including the date of contributions. A contribution made on 15 September 2017 and transferred under the Pacte framework in 2024 remains classified as a pre-27/09/2017 contribution on the new contract.

This provision is particularly attractive for savers holding old, underperforming contracts that were heavily funded before 27/09/2017. By transferring the contract (within the same insurer), they preserve the advantage of the uncapped 7.5% rate while gaining access to better investment options.

Frequently asked questions

Do Pacte transfers change the contribution date?

No. Contract transfers carried out under the Pacte law preserve the original contract's tax seniority, including the date of contributions. A contribution classified as "before 27/09/2017" retains that classification after the transfer.

Does the 150 000 euro threshold include old contributions?

No. The 150 000 euro threshold only takes into account contributions made after 27 September 2017. Earlier contributions are excluded from this calculation. A saver who contributed 200 000 euros before 27/09/2017 and 100 000 euros after remains below the 150 000 euro threshold for the post-2017 portion.

What happens if there was a previous partial withdrawal?

Partial withdrawals reduce the amount of contributions taken into account for the 150 000 euro threshold calculation, pro rata to the capital repaid. If a saver contributed 160 000 euros after 27/09/2017 and then made a partial withdrawal whose capital portion was 20 000 euros, their net contributions drop to 140 000 euros, which is below the 150 000 euro threshold.

How does the insurer know the contribution breakdown?

The insurer maintains a register of all contributions made to the contract with their dates. During a withdrawal, it automatically applies the pro rata apportionment between contributions before and after 27/09/2017. This apportionment appears on the IFU sent to the taxpayer and to the tax authorities.

Does opting for the progressive scale change the before/after 2017 distinction?

How do you declare gains from mixed contributions?

The insurer pre-fills the boxes on form 2042 distinguishing gains by contribution date. The taxpayer must verify these amounts and supplement them if necessary, particularly if they hold contracts with several insurers. The specific boxes on form 2042 C PRO (boxes 2CH, 2DH, etc.) allow gains to be apportioned according to the applicable tax regime.

Practical summary

The distinction between contributions before and after 27 September 2017 is a source of complexity for savers, but it also represents an optimisation opportunity for those who understand it well. The key points to remember:

• Contributions made before 27/09/2017 benefit from the 7.5% rate after 8 years with no contribution cap, a considerable advantage for large portfolios
• Post-cutoff contributions are subject to the 150 000 euro threshold, above which the rate rises to 12.8%
• The 150 000 euro threshold is assessed per person and across all contracts
• A married couple has a combined threshold of 300 000 euros
• The withdrawal strategy must factor in this distinction to minimise the tax burden
• The Pacte transfer preserves the classification of contributions

For savers holding older contracts that were heavily funded before 27/09/2017, those contributions represent a genuine "tax treasure" that should be preserved as far as possible by prioritising withdrawals from more recent contributions.