According to the Court of Auditors, the tax and social deductions from which retirement savings benefit “represent a significant cost for public finances”, estimated at 1.8 billion euros in 2022.
The Court of Auditors suggests reducing the tax advantage linked to retirement savings – or capitalization retirement – which today benefits primarily wealthy households seeking tax optimization, at a high cost for the State. According to the Court of Auditors, retirement savings remain “modest” in France, representing only “5.1% of pension contributions and 2.3% of benefits”. But the tax and social deductions from which it benefits “represent a significant cost for public finances”, estimated at 1.8 billion euros in 2022, she notes.
In its current format, it represents “above all an investment and savings instrument, whose advantageous taxation allows wealthy and relatively elderly savers to benefit from tax advantages”, according to the Court. In “a very restricted budgetary context”, “a tightening of this regime would be desirable, so as to avoid certain excesses which divert the systems from their function of preparing for retirement”, she writes.
A system “far from being generalized”
Retirement savings allows you to save during working life, to have resources available at retirement age to supplement the pensions provided by compulsory and supplementary schemes. In 2022, retirement savings collected 18.5 billion euros in contributions, while the outstanding amount (the total funds managed by the various retirement savings organizations) was 292.7 billion euros.
“The system is far from being generalized,” notes the Court. Only 13% of assets hold a company retirement savings plan and 10% an individual product – and these are sometimes the same, since it is possible to hold both products at the same time. The Court of Auditors also notes that “progress can still be made in terms of transparency of management fees”, with individual savers seeing their tax advantage “in part” captured by the accumulation of fees taken from their investment.
On the financing side of the economy, the Court observes that despite the reform that took place in 2019 in the Pacte law, retirement savings funds insufficiently finance companies. It proposes that this capital be directed more towards “SMEs/ETIs (mid-sized companies), as the Green Industry law of 2023 encourages to do”, notes the Court.
