Life Insurance and PER Annuity Exit Can Carry High Fees

Exiting a life insurance policy or a Plan d’Epargne Retraite (PER) into an annuity can be very costly. The cost stems from arrears fees and fees on the remaining annuity capital. Arrears fees (frais d’arrérage) and fees on the outstanding annuity balance (frais sur encours de rente) are applied at the moment of conversion. Both fees increase the total amount payable by the saver. These charges are often overlooked by savers when planning the transformation of their savings into a pension. Overlooking them can lead to unexpected reductions in the final pension amount. The exact amount of each fee depends on the contract manager handling the policy. Different managers may apply varying rates for arrears and balance fees. High fees directly diminish the net income that the saver receives from the annuity. Consequently, the saver’s retirement income may be lower than anticipated. Savers are advised to examine their contract terms and compare fee structures before initiating the annuity conversion. Understanding the fee schedule can prevent costly surprises.