Retirement savings: is the operation of the PER about to be reformed?

Making the Retirement Savings Plan more attractive for low-income households and eliminating a tax loophole: these are the two main lines followed by the Finance Commission in its report on the PER.

Thanks to the Pacte law, retirement savings have been simplified and democratized. Result: between 2022 and 2024, the outstanding amount on Retirement Savings Plans (PER) jumped by 64%. However, the success of this investment remains significantly lower than that of life insurance, which accumulated 1,800 billion euros in assets at the end of 2022, compared to 102.8 billion for retirement savings. To enable greater growth of the PER, the Finance Committee of the National Assembly is considering several avenues for improvement.

More attractive PER taxation for low-income households

According to data collected by INSEE, “the share of executives holding a retirement savings product actually amounted to 34% in 2021, compared to 16% on average for all households”. Retirement savings are therefore more widely used by the wealthiest households. Conversely, the most modest households use it less, and for good reason: the money invested in a PER is tax-exempt before being blocked until retirement, with the exception of a few cases of early release.

MP Félicie Gérard, rapporteur of the report of the fact-finding mission on the taxation of funded retirement savings, explains that even “if these figures are encouraging, the development of retirement savings in France seems insufficient to us”. To encourage the most modest savers to open and fund their PER, alignment of the tax regime for annuity withdrawals is recommended.

More precisely, this would involve standardizing the CSG deduction rates between voluntary payments and employee savings (9.2% CSG), and compulsory savings (subject to income tax after a reduction of 10% up to 4,123 euros in 2024, i.e. a final rate of between 0 and 8.3%). “It is modest people who are penalized, not those who are very well off and who have reached the ceiling in any case” summarizes Charles de Courson, rapporteur for the Finance Commission.

Read also: Retirement savings: how much money have the French placed in their PER?

Towards the elimination of a tax loophole for retirement savings?

In principle, payments made to a PER during one’s working life and deducted from one’s taxable income are reinstated upon liquidation of one’s contract upon retirement. However, there is a flaw in this system: in the event of the death of the plan holder before the liquidation of the latter, no tax catch-up is carried out. In other words: the heirs do not have to reinstate the amounts on their tax return.

The deputy Charles de Courson believes that it would be necessary to “tax the beneficiaries, by subjecting the sums transmitted to income tax, as long as they correspond to deducted payments”, which would put an end to a tax advantage in matter of inheritance. “In order to avoid a phenomenon of double taxation”, the amount of income tax thus paid would then be deductible from the inheritance assets, and would therefore avoid having to pay both income tax and inheritance taxes.

Other avenues of reflection are being studied and could shake up the retirement savings landscape. A standardized information sheet could in particular be made compulsory in order to better inform savers about the costs associated with holding a PER. The subscription age limit could also be set at 67 years, with automatic liquidation of PERs at the age of 70. The general management of the Public Treasury is already considering this double age limit.