When the time comes to draw down a Plan d'Epargne Retraite (PER), every saver faces a pivotal choice: withdraw the balance as a lump sum, convert it into a life annuity (rente viagere), or combine both. The life annuity, often dismissed as an outdated product from another era, actually deserves serious consideration. In a context of rising life expectancy and uncertainty about the long-term sustainability of mandatory pension schemes, the guarantee of lifetime income provides a security that capital alone cannot offer. But for an annuity to be a well-informed choice rather than a trap, you need to understand the calculation mechanics, available options, applicable tax rules and decision criteria. This comprehensive guide gives you all the keys to making the right decision.
What is a PER life annuity?
A life annuity is a regular income paid for life to the PER holder from the moment they claim their pension rights. Unlike a lump-sum withdrawal, the annuity guarantees a supplementary income until death, regardless of how long the insured person lives. This is the fundamental principle of longevity risk pooling: policyholders who die early effectively "fund" the annuities of those who live longer. While this mechanism may seem disadvantageous at an individual level, it is rational from a collective standpoint and offers unmatched protection against the risk of outliving your savings.
With the PER, withdrawing as a life annuity remains a relevant option, particularly for savers who want to secure a guaranteed supplementary income for life. But to make an informed choice, you need to understand how the annuity is calculated, what options exist and what tax rules apply.
How the life annuity works
When you choose the annuity withdrawal option, the insurer converts your accumulated capital into periodic payments (monthly, quarterly or annual). The annuity amount depends on several factors: the capital accumulated, your age at the time of conversion, the mortality tables used and the technical rate applied. Once the conversion is made, the capital is no longer accessible: it is permanently transformed into an income stream. It is this irreversibility that constitutes both the strength and the weakness of the life annuity.
It is important to understand that the conversion rate (i.e. the ratio between the annual annuity and the converted capital) varies significantly from one insurer to another. The gap can reach 15 to 20% between the best and worst offers on the market, representing hundreds of euros of difference per month for the rest of your life. Comparing offers is therefore essential.
Life annuity: an insurance product, not an investment
Unlike a scheduled withdrawal programme on a life insurance policy (assurance vie) where you remain the owner of your capital, the life annuity is a risk transfer to the insurer. You exchange your capital for a guarantee of lifetime income. If you live a long time, the insurer "loses out". If you die early, it is you (or your heirs) who lose. This mechanism is fundamentally different from an investment and should not be judged by the same criteria. The question is not "what is the return?" but "do I want to protect myself against the risk of living a very long time?"
How is the life annuity calculated?
The determining factors
The annuity calculation is based on an actuarial formula that takes into account five main factors:
- Accumulated capital: the larger your savings, the higher the annuity. This is the most intuitive and easiest factor to control (by saving regularly during your working life).
- Age at liquidation: the later you convert, the higher the annuity (because the expected payment period is shorter). A saver who converts their capital at 67 will obtain an annuity roughly 30% higher than one who converts at 62, all other things being equal.
- Mortality tables: insurers use regulatory tables (TGH05/TGF05 for men and women). These tables, regularly updated, incorporate life expectancy gains across successive generations. Women, whose life expectancy is longer, receive lower annuities for the same capital, because the insurer expects to pay the annuity for a longer period.
- Technical rate: this is the rate at which future returns on the annuity fund are anticipated. A high technical rate (up to the regulatory maximum of 1.5%) increases the initial annuity but limits future revaluations. A zero technical rate produces a lower initial annuity but with greater potential for revaluation. The choice of technical rate is a trade-off between immediate income and future income.
- Options selected: reversionary annuity, guaranteed payment periods, stepped annuity, long-term care option. Each option reduces the base annuity amount, as it adds an additional guarantee cost for the insurer.
Detailed worked example: the case of Jean-Marc
Jean-Marc is 64 years old, retiring, and has a PER balance of 200,000 euros. A former executive in the pharmaceutical industry, he already receives a mandatory pension of 2,800 euros per month but wants to secure a guaranteed supplementary income for life to cover leisure expenses and potential healthcare costs.
Without any particular option, at a conversion rate of approximately 4% (a typical order of magnitude in 2026 for a 64-year-old man), the annual annuity would be around 8,000 euros, or approximately 667 euros per month.
With a 60% reversionary option in favour of his wife Marie-Claire (aged 62), the conversion rate drops to around 3.2%, producing an annuity of 6,400 euros per year (533 euros per month). The reversionary option has a cost (a 20% reduction in the annuity), but it provides essential protection: if Jean-Marc dies before Marie-Claire, she will continue to receive 320 euros per month (60% of 533 euros), a valuable supplement for a retiree whose own pension is limited.
| Scenario | Annual annuity | Monthly annuity | Reduction vs simple annuity | Protection |
|---|---|---|---|---|
| Simple annuity (no option) | 8,000 € | 667 € | - | None |
| 60% reversionary | 6,400 € | 533 € | -20% | 320 €/month to spouse |
| 100% reversionary | 5,400 € | 450 € | -33% | 450 €/month to spouse |
| 15-year guaranteed payments | 6,800 € | 567 € | -15% | Heirs receive remaining annuity |
| Stepped annuity (120/80%) | 8,400 then 6,200 € | 700 then 517 € | Variable | None |
Jean-Marc also compares offers from several insurers before making his choice, since conversion rates vary significantly from one policy to another.
| Insurer / Policy | Simple annuity conversion rate | Estimated monthly annuity | Payment charges |
|---|---|---|---|
| Spirica (Linxea Spirit PER) | 4.1% | 683 € | 0% |
| BNP Paribas Cardif (Lucya Cardif PER) | 3.9% | 650 € | 0% |
| SwissLife (Placement-direct PER) | 4.0% | 667 € | 0% |
| Generali (Boursorama PER) | 3.7% | 617 € | 0.50% |
The gap between the best rate (4.1% at Spirica) and the worst (3.7% at Generali) represents 66 euros per month, or 792 euros per year. Over 20 years of retirement, that is nearly 16,000 euros of difference. The choice of insurer is therefore far from trivial.
Case study: Odette, 64, former self-employed nurse
Odette is 64 years old. She practised as a self-employed nurse (infirmiere liberale) for 32 years and has just retired. Her mandatory pension schemes (CNAVPL + CARPIMKO) total 1,650 euros per month, an amount insufficient to maintain her usual standard of living (monthly expenses of 2,400 euros).
Odette has built up 185,000 euros in her PER over the course of her career, through regular contributions of 6,000 to 10,000 euros per year, deducted from her BNC (professional income).
She is studying three withdrawal options:
Option A: simple life annuity. Conversion rate at 64: approximately 4.0%. Gross annual annuity: 7,400 euros, or 617 euros per month. After tax (pension regime, marginal tax bracket of 11%), net annuity of approximately 450 euros per month. Total income: 1,650 + 450 = 2,100 euros per month.
Option B: annuity with 15-year guaranteed payments. Slightly reduced annuity (around 530 euros gross per month), but guaranteed payment to heirs in case of early death. Net annuity of approximately 395 euros per month. Total income: 2,045 euros per month.
Option C: mixed withdrawal (80,000 euros as lump sum + 105,000 euros as annuity). Net capital after tax: approximately 67,780 euros, invested in a Lucya Cardif life insurance policy to generate supplementary income through scheduled partial withdrawals. Annuity on 105,000 euros: approximately 300 euros net per month. Total income: 1,650 + 300 = 1,950 euros per month, plus 67,780 euros of available capital for unexpected expenses.
Odette chooses Option C, which gives her a precautionary capital to deal with unforeseen events (home improvements, long-term care, helping her son) while securing a guaranteed supplementary income of 300 euros per month for life.
Available annuity options
The simple life annuity
This is the basic option: you receive an annuity until your death. When you die, payments cease and the remaining capital is retained by the insurer. This option offers the highest annuity amount because the insurer takes on no additional risk. It is suitable for single policyholders or those whose spouse has sufficient independent income.
The reversionary annuity
In the event of death, your spouse or designated beneficiary continues to receive a fraction of the annuity (typically 50%, 60% or 100%). The reversionary rate directly impacts the initial annuity amount. A 100% reversionary annuity can reduce the annuity by 25 to 35% compared with a simple annuity, because the insurer commits to paying the annuity for the lifetime of whichever spouse lives longest.
The choice of reversionary rate depends on the couple's situation. If the surviving spouse has comfortable independent income, a 60% reversion may suffice. If the spouse is financially dependent, a 100% reversion offers maximum security. The spouse's age also plays a role: the younger the spouse, the higher the cost of reversion, as the expected payment period is longer.
The annuity with guaranteed payment periods
You guarantee the annuity will be paid for a minimum period (10, 15 or 20 years), even in the event of early death. If you die before the end of the guaranteed period, your beneficiaries receive the remaining payments. This option is attractive for people in poorer health or those concerned about "losing" their capital in the event of early death.
Example: Jean-Marc chooses 15-year guaranteed payments. If he dies after 5 years, his heirs will receive a further 10 years of annuity payments (approximately 67,000 euros). If he lives beyond 15 years, the annuity continues normally until his death. The cost of this guarantee is a reduction of approximately 15% of the annuity compared with a simple annuity.
The stepped annuity
This option allows you to adjust the annuity amount over time. Two configurations are possible:
- Decreasing annuity: you receive a higher annuity in the early years (for example 120% of the base amount for 10 years, then 80% thereafter). This option suits active young retirees who have higher expenditure at the start (travel, leisure, home improvements) and anticipate a more sedentary lifestyle later on.
- Increasing annuity: you receive a lower annuity initially (80%) then a higher one later (120%). This option anticipates the growing needs associated with age, particularly healthcare costs and potential long-term care expenses.
The choice between a decreasing and increasing annuity depends on your health, your retirement plans and your other income sources. There is no universal answer.
The annuity with long-term care option
Some policies offer a doubling or increase of the annuity in the event of loss of autonomy (total or partial dependency). This guarantee has a cost that reduces the base annuity by approximately 10 to 15%, but it can provide a valuable safety net. The long-term care risk is the most underestimated financial risk of retirement: the average cost of a care home (EHPAD) in France exceeds 2,500 euros per month, and home care with professional help can cost 1,500 to 3,000 euros per month.
Tax rules for the PER life annuity
The tax treatment of the PER annuity depends on a crucial factor: were the contributions deducted from taxable income at the time of payment or not? Each situation gives rise to a specific tax regime.
Annuity from deducted contributions
When contributions were deducted from taxable income at the time of payment (the most common case, since this is the main advantage of the PER), the annuity is taxed under the pension and retirement income regime. It is subject to the progressive income tax scale after a 10% allowance (capped at 4,321 euros per household in 2026). Social levies of 17.2% apply to the full annuity (with a deductible CSG portion of 6.8%).
Example with Jean-Marc: For an annual annuity of 8,000 euros:
- 10% allowance: 800 euros
- Taxable base: 7,200 euros
- Income tax (11% bracket): 792 euros
- Social levies (17.2% on 8,000 euros, with deductible CSG): approximately 1,250 euros
- Net annuity: approximately 5,958 euros per year, or 496 euros per month
The gross annuity of 667 euros per month thus becomes 496 euros net after tax and social levies, a reduction of 25.6%. This deduction should be weighed against the tax saving obtained at entry, typically 30 to 41% of the amount contributed.
Annuity from non-deducted contributions
If contributions were not deducted at entry, the annuity benefits from the tax regime for annuities acquired for valuable consideration (rentes viageres a titre onereux, or RVTO). Only a fraction of the annuity is taxable, depending on the annuitant's age when payments begin:
- Under 50: 70% taxable
- 50 to 59: 50% taxable
- 60 to 69: 40% taxable
- 70 and over: 30% taxable
Example: For an annuity of 8,000 euros starting at age 64, only 3,200 euros (40%) is taxable. At a marginal tax rate of 11%, the tax is only 352 euros, compared with 792 euros for an annuity from deducted contributions. Social levies also apply only to the taxable fraction (3,200 euros), i.e. approximately 550 euros. Net annuity: approximately 7,098 euros per year, significantly more favourable than the pension regime (5,958 euros). But this difference must be weighed against the absence of a tax deduction at entry.
Comparison of the two tax regimes
| Criterion | Annuity from deducted contributions (pensions) | Annuity from non-deducted contributions (RVTO) |
|---|---|---|
| Income tax base | 90% of annuity (10% allowance) | 30 to 70% depending on age at commencement |
| Tax rate | Progressive income tax scale | Progressive income tax scale |
| Social levies | 17.2% on the full amount | 17.2% on the taxable fraction only |
| Net annuity (8,000 €, 11% marginal rate, age 64) | 5,958 € | 7,098 € |
| Tax advantage at entry | Yes (deduction from income) | No |
Deductible CSG: an advantage not to be overlooked
Of the 17.2% social levies applied to the annuity, 6.8% corresponds to deductible CSG. This CSG can be deducted from the following year's taxable income, which indirectly reduces income tax. For a gross annuity of 12,000 euros, the deductible CSG amounts to 816 euros, reducing taxable income for year N+1 by the same amount. At an 11% marginal rate, this saves 90 euros in tax per year. At a 30% marginal rate, it saves 245 euros. It is a modest but regular advantage that accumulates year after year.
Annuity or lump sum: how to choose?
The advantages of the annuity
The annuity protects against longevity risk. If you live a very long time (90, 95 years or more), you will receive in total far more than your initial capital. For a 64-year-old man, the "break-even point" (i.e. the age at which the total annuity received exceeds the converted capital) typically falls around 82-85, depending on the conversion rate and revaluations.
The annuity also offers invaluable peace of mind: no financial management to handle, no risk of squandering your savings, no stress from market fluctuations. Behavioural finance studies show that most retirees underestimate their life expectancy and spend their capital too quickly, leaving themselves exposed to a risk of hardship in later life.
The limitations of the annuity
The main drawback is irreversibility: once the conversion is made, you can no longer access your capital. In the event of an urgent need (major home improvements, helping a child in difficulty, uncovered healthcare expenses), you are locked in. Furthermore, if you die shortly after converting to an annuity (without a reversionary or guaranteed payment option), the remaining capital is lost to your heirs.
Another drawback is the loss of control over capital allocation. Once converted into an annuity, you no longer have a say in the investments. If interest rates rise sharply after your conversion, you cannot benefit directly (unless your annuity is revalued accordingly, which is not guaranteed).
Decision criteria
Favour the annuity if:
- You have a good life expectancy (favourable family history, good health)
- You do not have sufficient other guaranteed income sources (low pension)
- You want to protect your spouse through reversion
- You fear mismanaging a large capital sum or spending it too quickly
- The annuity amount is significant (at least 300 to 500 euros per month)
Favour the lump sum if:
- You have a specific project (loan repayment, home improvements, gift to children)
- You already have sufficient regular income (high pension, rental income, life insurance)
- Your life expectancy is uncertain (health problems)
- You want to pass assets to your heirs
- The PER balance is modest (below 80,000 euros, the annuity is often too small to be worthwhile)
The optimal age for conversion to an annuity
The age at which you convert your capital into an annuity has a major impact on the amount received. The longer you wait, the higher the annuity:
| Conversion age | Indicative conversion rate (men) | Annual annuity for 200,000 euros |
|---|---|---|
| 62 | 3.5% | 7,000 € |
| 64 | 4.0% | 8,000 € |
| 66 | 4.5% | 9,000 € |
| 68 | 5.0% | 10,000 € |
| 70 | 5.6% | 11,200 € |
Waiting until 68 rather than 62 increases the annuity by 43%. But during those 6 years of waiting, you receive nothing, and your capital is exposed to market volatility. The optimal decision depends on your other income sources, your health and your risk appetite. If your other income is sufficient to cover your needs between 62 and 68, delaying the conversion is generally advantageous.
The mixed withdrawal: the most balanced compromise
Most financial advisers recommend a mixed withdrawal: part as a lump sum (for projects and flexibility) and part as an annuity (for guaranteed lifetime income). The PER allows this without any restriction.
For example, Jean-Marc could withdraw 80,000 euros as a lump sum (for home improvements and a trip) and convert 120,000 euros into an annuity (for a guaranteed income of approximately 400 euros per month for life). This approach combines the best of both worlds, provided the proportions are properly calibrated to actual needs.
Policies such as Linxea Spirit PER, Lucya Cardif PER and Placement-direct PER offer this flexibility of mixed withdrawal, with the option to schedule partial withdrawals spread over several years before converting the balance into an annuity.
Comparing annuity offers: methodology
Not all insurers offer the same conversion rates. The gap can reach 15 to 20% between the best and worst rates on the market. Before converting your capital into an annuity, compare at least three offers based on the following criteria:
- Conversion rate: this is the primary criterion, as it determines the amount of your annuity for a given capital. Request detailed quotes from each insurer.
- Payment charges (frais d'arrerage): some insurers deduct charges on each annuity payment (up to 3% with certain traditional providers). Favour policies with no payment charges, such as Linxea Spirit PER or Placement-direct PER.
- Revaluation terms: how does the annuity evolve over time? Is it indexed to inflation, to the annuity fund's performance, or fixed? An annuity that is not revalued gradually loses its purchasing power (at 2% inflation, the loss is 33% over 20 years).
- Available options: not all insurers offer the same options (reversionary, guaranteed payments, stepped, long-term care). Check that the options you need are available.
- Financial strength of the insurer: the annuity is a very long-term commitment (potentially 30 years or more). Make sure the insurer has strong solvency (Solvency II ratio above 150%).
Practical tip: it is possible to transfer your PER to another insurer before converting to an annuity, to benefit from a better conversion rate. Transfers are free after 5 years of holding. If your current policy offers a mediocre conversion rate, do not hesitate to compare and transfer.
The life annuity and inflation
An often underestimated risk is the erosion of the annuity by inflation. An annuity of 600 euros per month today will be worth only 490 euros in purchasing power in 10 years at 2% annual inflation, and only 400 euros in 20 years. Annual annuity revaluations (based on the profit-sharing of the annuity fund) partially offset inflation, but rarely in full.
To guard against this risk, three approaches are possible:
- Choose an increasing annuity (stepped option): low annuity at the start, increasing over time
- Supplement the annuity with scheduled partial withdrawals from a life insurance policy, indexed to inflation
- Keep a portion in capital invested in equities or SCPI (property funds), whose income tends to track inflation over the long term
Conclusion
The PER life annuity remains a powerful tool for securing your retirement income. Its main advantage is the guarantee of lifetime income, a protection that no other financial product can offer with the same certainty. But its costs (irreversibility, pension tax regime for deducted contributions, loss of capital for heirs, risk of erosion by inflation) must be carefully evaluated.
For the majority of savers, the optimal solution is a mixed withdrawal: a portion as a lump sum for flexibility and projects, a portion as an annuity for income security. The right proportion depends on your personal situation: age, health, income, assets, projects and family composition.
Take the time to simulate the different options with the tools provided by your policy and compare the conversion rates of several insurers before committing. The choice between annuity and lump sum is an irreversible decision that deserves thorough reflection and, ideally, guidance from a financial adviser.
This article is published for informational purposes and does not constitute personalised investment advice. The conversion rates and numerical examples are given as indicative figures and vary depending on the insurer, market conditions and the mortality tables in force. Before making any annuity withdrawal decision, consult a qualified financial adviser and compare several offers.