For the purchaser, the price of a property in life is broken down into two parts: on the one hand a monthly annuity, on the other a cash sum, called the “bouquet”. The more this bouquet is important, the less the monthly annuity will be. The life annuity seduces rather wealthy buyers: the bouquet is paid “cash”, it is not possible to borrow.
Pascal Larbier, 52, is a business manager. This boss of an IT company is banking on life annuity to increase his assets. Since 2017, he has already purchased four properties this way. In this excerpt from “Special Envoy”, with a real estate agent, he studies the possibility of a fifth purchase. It is an apartment for which he would pay a bouquet of 140,000 euros. The monthly annuity requested is 992 euros, to which must be added the charges for the apartment, i.e. “1,220 euros to be released every month“. But for how long? How to estimate the theoretical duration of the period during which he will pay this pension?
The Daubry scale, a calculation based on statistical life expectancy
To calculate this duration, there is a scale, the Daubry scale. It is based on life expectancy data provided by insurance companies and INSEE. For an 81-year-old woman and a 78-year-old man, as in the case of the sales couple, the table indicates a life expectancy of 13.2 years. “In theory, statistically, the last alive of the couple will still live for thirteen years“, explains the real estate agent.
With the moral problem that it can pose, because it depends on the lifespan of the sellers, life annuity sales still suffer from a bad image. But this mathematical calculation relieves the conscience of the potential buyer: “Imagine that during a visit, I start to take an interest in the state of health of the people I have in front of me… it would become a super unhealthy thing! I’m only interested in mathematics: they have an age, a statistical life expectancy, and that’s it!“, reassures Pascal.
Excerpt from “Life annuity, the good deal?”, a report to see in “Special Envoy” on May 19, 2022.
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