A new dawn for life annuity

Life annuity is coming back. Still potentially interesting, the investment deserves to be looked at in detail before signing up for it.

So life annuity is coming back– what are the reasons for this return? Increasingly we’re seeing that  low incomes push owners to seek a supplementary pension for their retirement, and the increase of house prices is also preventing low income households from buying. “The system allows the buyer to prepare his own retirement while enhancing others’”, states Venance Gaymard, director of Life Annuity Europe. For a French property sale with deferred payment, the annuity offers the buyer the opportunity to only pay a lump sum upon purchase and then a monthly amount paid until the decease of the seller. The advantage is that the property value, calculated according to the right of use and occupancy (95% of life estates are occupied), can be reduced from 30 to 50% depending on the age of the seller.

However, one must exercise caution: life annuity is interesting only if the contract is well balanced and includes calculated incomes according to the means and plans of both parties, in particular in cities such as Paris where the sellers are numerous. A win – win situation for example would be for a couple in their forties, delighted to offer themselves a house in the hinterlands of Nice, for 69,000 Euros and a monthly allowance of 575 Euros , currently paid to the owners who are in their seventies.

Nevertheless, life annuity still remains a fairly niche market. Even if the acquired French property continues to increase in value throughout the contract period, buyers are often afraid of having to pay (too) long, keeping in mind the image of a sprightly, healthy 100 year old owner.