French retirement savings plan (PER)
A retirement savings product created by the 2019 PACTE law, which unifies earlier schemes, makes voluntary contributions tax-deductible and allows payout as a lump sum or an annuity.
The retirement savings plan was created by the law of 22 May 2019 on business growth and transformation, known as the PACTE law, and has been sold since 1 October 2019. It replaced a patchwork of products, PERP, Madelin pension, Préfon, PERCO, article 83, with a common structure in three compartments by the source of the money: voluntary contributions, employee savings, mandatory employer contributions. It exists as an individual plan and as company plans, collective or mandatory, and can take the form of an insurance contract or a securities account. Voluntary contributions are deductible from taxable income within an annual limit, which makes it a tax tool for high earners. Savings are locked until retirement, except for early release cases listed by law, including buying a main residence and certain life events. At payout, the holder chooses between a lump sum, an annuity or a combination, except for the mandatory compartment, paid as an annuity. By default, savings are placed in horizon-based managed allocation, which gradually reduces risk as retirement approaches. The product is portable: a plan can be transferred from one provider to another, which opened competition on fees.
Hypothetical case, under the PER created by the Pacte law of 22 May 2019: a manager taxed at 41 percent pays 10,000 euros into an individual PER and reduces tax by 4,100 euros. At retirement, she will withdraw this capital in one go; the part corresponding to contributions will then be subject to income tax, and the gains to the flat tax.
PER, French retirement savings plan, PERIN, PERO, PERECO
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