Scheduled withdrawals (rachats programmes) are one of the smartest strategies for turning a life insurance policy into a source of regular income. Unlike a life annuity (rente viagere), which requires the permanent surrender of your capital, scheduled withdrawals let you receive income while keeping full control of your savings. You can change the amount, suspend withdrawals or stop them at any time. This flexibility, combined with the favourable tax treatment of life insurance after 8 years, makes scheduled withdrawals a first-rate wealth tool for retirees, as well as for anyone looking to generate supplementary income from their savings.
How scheduled withdrawals work
A scheduled withdrawal is an automatic, regular payment taken from your life insurance policy. You define a fixed amount and a frequency (monthly, quarterly or annual), and the insurer deducts the corresponding sum at each due date and transfers it directly to your bank account.
The tax mechanism is identical to that of a standard partial withdrawal. Each withdrawal breaks down into two parts: a portion corresponding to premiums paid (not taxable, since it is the return of your own money) and a portion corresponding to gains (potentially taxable). The formula for calculating the gains portion in each withdrawal is: withdrawal amount multiplied by the ratio of total gains in the policy to the total policy value.
The older your policy and the lower the gains ratio relative to total premiums paid, the smaller the taxable portion of each withdrawal. This mechanism is what makes scheduled withdrawals so tax-efficient, especially after 8 years of holding.
Optimising the tax treatment of scheduled withdrawals
The annual allowance: the heart of the strategy
After 8 years of holding, you benefit from an annual allowance of 4,600 euros for a single person or 9,200 euros for a married or PACS couple on the gains portion of your withdrawals. The central objective of any scheduled-withdrawal strategy is to calibrate your withdrawals so that the gains portion stays within this allowance limit, meaning you pay only the 17.2% social-security levies on gains, with zero income tax.
Worked example: Michel, 64, retired civil servant
Michel retired in 2024 after a 38-year career in the territorial civil service. His pension is 2,400 euros net per month, but his fixed expenses reach 3,100 euros monthly (rent, senior health insurance, food, regular charges). He is short by 700 euros per month, or 8,400 euros per year.
Michel holds a Placement-direct Vie policy opened 12 years ago with the following characteristics:
- Total capital: 280,000 euros
- Total premiums paid: 190,000 euros
- Unrealised gains: 90,000 euros (i.e. 32.1% of the policy)
If he sets up scheduled withdrawals of 8,400 euros per year (700 euros per month):
- Gains portion in the annual withdrawal: 8,400 euros x 32.1% = 2,698 euros
- Available allowance (single person): 4,600 euros
- Gains taxable for income tax: 0 euros (2,698 euros remains within the allowance)
- Social-security levies: 2,698 euros x 17.2% = 464 euros
- Net amount received annually: 7,936 euros, or approximately 661 euros per month
Michel can even increase his withdrawals up to approximately 14,300 euros per year (4,600 / 32.1%) before exceeding the allowance and owing income tax. With this margin, he has comfortable flexibility for unexpected expenses.
The couple's case: a doubled allowance
For a married or PACS couple, the allowance rises to 9,200 euros per year. If each spouse holds their own policy, withdrawals can be split between the two policies to optimise use of the joint allowance. In practice, a couple can withdraw until the combined gains contained in both spouses' withdrawals reach 9,200 euros, without paying any income tax.
The impact of the premiums/gains ratio on the optimal amount
The ratio between gains and total policy capital is the determining factor. The lower this ratio, the more capital you can withdraw before consuming your allowance.
| Criterion | Policy with low gains ratio (20%) | Policy with high gains ratio (50%) |
|---|---|---|
| Policy value | 200,000 euros | 200,000 euros |
| Gains portion | 40,000 euros (20%) | 100,000 euros (50%) |
| Annual withdrawal to fully use the allowance (single) | 23,000 euros/year | 9,200 euros/year |
| Gains in this withdrawal | 4,600 euros | 4,600 euros |
| Years until capital exhaustion (without returns) | 8.7 years | 21.7 years |
| Monthly net income (excl. social levies) | 1,917 euros | 767 euros |
Setting up scheduled withdrawals: step by step
Step 1: Calculate your policy's premiums/gains ratio
Log in to your online dashboard or ask your insurer for the current surrender value and the cumulative net premiums paid. The difference is your unrealised gains. Divide gains by total value to get the gains ratio. On online policies such as Linxea Spirit 2, Lucya Cardif or Boursorama Vie, this information is generally accessible in a few clicks under the "policy details" section.
Step 2: Define the optimal annual amount
Use the following formula: optimal annual amount = allowance / gains ratio. For a single person with a 30% gains ratio, the optimal annual amount is 4,600 / 0.30 = 15,333 euros per year, or approximately 1,278 euros per month. This amount represents the maximum you can withdraw each year without paying income tax (only the 17.2% social-security levies apply to gains).
Step 3: Choose the frequency
Monthly is ideal for supplementing a pension. It provides a regular flow comparable to a salary and simplifies daily budget management. Quarterly is a good compromise between regularity and administrative simplicity. Annual allows optimal tax control since only one calculation is needed per year, but it requires sufficient liquidity from other sources to cover day-to-day needs.
Step 4: Choose which investment vehicles to withdraw from
When you set up scheduled withdrawals, you can generally choose which vehicles the deductions are taken from. Two strategies are possible. The first is to withdraw proportionally from all vehicles, which keeps your allocation unchanged. The second is to withdraw primarily from the euro fund, which preserves your unit-linked exposure and growth potential but gradually shifts your allocation toward riskier assets.
Step 5: Adjust over time
As withdrawals proceed, the premiums/gains ratio evolves. Premiums are returned proportionally with each withdrawal, keeping the ratio relatively stable over time. However, market fluctuations and euro-fund interest modify this ratio. An annual recalculation is recommended to verify that your withdrawals remain optimised relative to the allowance.
Scheduled withdrawals vs life annuity: the full comparison
| Criterion | Scheduled withdrawals | Life annuity (rente viagere) |
|---|---|---|
| Reversibility | Full (modify or stop at any time) | Irreversible (permanent surrender of capital) |
| Capital | Remains available and transferable | Surrendered: lost on death (except reversion) |
| Estate transfer | Remaining capital transferred to beneficiaries | Lost except for guaranteed annuities or reversion |
| Tax treatment | 4,600 / 9,200-euro allowance after 8 years | Variable allowance based on age at annuity start |
| Duration | Limited to available capital | Lifelong (until death, regardless of duration) |
| Longevity risk | Risk of capital depletion | None (payments guaranteed for life) |
| Implicit return | Depends on policy vehicles | Fixed at conversion (3.5 to 4.5% at age 65) |
Scheduled withdrawals are generally preferable if you have diversified wealth, if you wish to preserve the transferability of your capital and if you are comfortable with the idea of gradually managing the depletion of your savings. A life annuity is better suited if you fear outliving your capital, if you have no estate-transfer objective and if you prefer the absolute security of a guaranteed lifetime income.
Advanced scheduled-withdrawal strategies
The multi-policy strategy
If you hold multiple life insurance policies with different gains ratios, make your withdrawals first from the policy with the lowest gains ratio. This maximises the amount you can withdraw tax-free. For example, if you have one policy with 15% gains and another with 45%, a 10,000-euro withdrawal from the first generates only 1,500 euros of taxable gains, versus 4,500 euros from the second. The difference is considerable.
Combining scheduled withdrawals with PER contributions
For those still working, a powerful strategy consists of making scheduled withdrawals from life insurance (lightly taxed after 8 years) and reinvesting all or part into a PER to benefit from the tax deduction. The net tax cost can be virtually zero, or even positive, if your marginal tax rate is high.
Consider a worker at the 41% marginal rate who withdraws 10,000 euros from their life insurance (of which only 2,000 euros of gains are taxable, absorbed by the 4,600-euro allowance). They reinvest 8,000 euros in their PER and obtain a tax saving of 3,280 euros (8,000 x 41%). The operation generates a net tax benefit of 3,280 euros, minus social-security levies of 344 euros on the life insurance gains, for a net gain of 2,936 euros.
Managing the sustainable withdrawal rate
An annual withdrawal rate of 3% to 4% of capital is generally considered sustainable over 25 to 30 years, provided the policy continues to generate positive returns. Beyond 4%, the risk of premature capital depletion increases significantly, especially if markets experience down years in the early withdrawal period (the "sequence of returns risk" phenomenon).
The adjusted 4% rule
The famous "4% rule" (from the 1998 Trinity study) suggests that a withdrawal rate of 4% of initial capital, adjusted for inflation each year, allows a diversified portfolio to last at least 30 years in 95% of historically tested scenarios. This rule, designed for the American market, should be adapted to the French context: a rate of 3.5% is more prudent given the historically lower returns of European markets and French taxation.
Indexing withdrawals to inflation
Fixed withdrawals of 700 euros per month will inevitably lose purchasing power over the years. At 2% annual inflation, today's 700 euros will be worth only the equivalent of 575 euros in 10 years and 472 euros in 20 years. To maintain your real standard of living, increase your withdrawals by 2% to 3% each year. This indexation must be factored into the sustainability calculation of your strategy.
Pitfalls to avoid
Ignoring social-security levies
Even when the gains portion of your withdrawals stays within the income-tax allowance, the 17.2% social-security levies still apply to those gains. This deduction, while moderate, must be factored into your net income calculation. For an annual withdrawal of 12,000 euros with 3,000 euros in gains, social-security levies amount to 516 euros per year. That is the equivalent of one month's withdrawals lost out of 17 months.
Forgetting the impact on residual capital
Excessive withdrawals erode capital and reduce future gains. This is a vicious circle: less capital means less return, which forces proportionally larger withdrawals to maintain the same income, which further accelerates capital erosion. Monitor the pace of capital consumption and adjust your withdrawals if capital declines faster than expected.
Withdrawing before 8 years of holding
Before 8 years, taxation is significantly less favourable: gains are subject to the 30% flat tax (12.8% income tax + 17.2% social-security levies) with no allowance. If possible, wait until the eighth anniversary of your policy before setting up scheduled withdrawals. This is why it is crucial to open your life insurance as early as possible, even with a minimal contribution, to start the tax clock running.
Neglecting the vehicle allocation during withdrawals
If your scheduled withdrawals default to the euro fund only, you maintain your unit-linked exposure but progressively unbalance your allocation. Over time, your policy can end up almost entirely invested in unit-linked funds, increasing overall risk. Regularly check your policy's allocation and adjust withdrawal terms if necessary.
Conclusion
Scheduled withdrawals are a remarkably effective wealth tool for turning your life insurance into a source of supplementary income. By carefully calibrating your withdrawals against the annual allowance, choosing the right policy and the right frequency, and regularly monitoring the evolution of your gains ratio, you can receive regular income with minimal taxation while maintaining control and transferability of your capital. The key is anticipation: start preparing your scheduled-withdrawal strategy several years before you need it, to optimise both the taxation and the composition of your policy.
Disclaimer
The information in this article is provided for educational purposes and does not constitute personalised investment advice. The amounts and calculations are given for illustrative purposes. Consult a wealth adviser to adapt this strategy to your personal situation.