Retirement savings: what happens in a divorce?

Taxation

Two spouses married without a prior contract decide to divorce. Difficulties arose during sharing operations, particularly with regard to a complementary retirement savings contract, amounting to €102,212, financed by common funds.

The Court of Cassation has just received a case where the wife contested the decision of the Court of Appeal which considered that retirement savings, available at the time of cessation of activity, are personal property of the subscriber spouse, without the right to compensation due to the marital community, due to “rights exclusively attached to the person”.

This question is not new, it was raised in a previous case (Cass. civ. 1ère February 28, 2018 no. 17-13.392) where the husband, affiliated to the capitalization scheme for civil servants, maintained that the contributions paid constitute debts of the community since a “Préfon Retraite” contract can only be terminated in the form of a life annuity paid after its termination of professional activity. It was therefore, according to him, a debt contracted for the maintenance of the household. Here too, in this new case on which the Court of Cassation has just ruled, there was question of “Madelin Law” retirement savings for self-employed and liberals, similar to the Préfon for civil servants.

Reward or not?

The Court of Cassation, in its judgment of October 2, 2024, has no problem recalling that according to article 1437 of the civil code “whenever a sum is taken from the community to pay debts or personal charges to the 'one of the spouses must be rewarded'.

It is obvious that this voluntary savings is inherent in nature since it will ultimately only benefit the subscriber (Cass. civ. 1ère April 30, 2014 no. 12-21.484) but nothing justifies the appropriation of a share of the couple's income escapes the rules of sharing during a divorce under the pretext that this savings, as the husband claimed in the case judged in 2018, “opens the right to a supplementary pension unavailable on the date of the dissolution of the community”.

Applicable to PER

Any additional retirement savings, especially the individual PER, must in the event of divorce give rise to a reward when it has been funded by the couple's common money (unless proof of re-employment of own funds is provided). Clearly, we must share these savings 50/50 in the liquidation of the interests of the married couple under the legal matrimonial regime.

The Court of Appeal appears to have confused the civil rules applicable in the event of a subscriber's divorce and the financial rules relating to the subscriber's rights.

Remember that in the case of life insurance held by a spouse in common property, there is a surrender value of the contract which is available at any time. Therefore this value is considered to be part of the community in accordance with article 1401 of the Civil Code. This solution applicable to divorces was affirmed by the Court of Cassation in 1992, in its famous Praslicka judgment (Cass. civ. 1ère March 31, 1992, n° 90-16343; Cass. civ. 1ère April 19, 2005, n°02- 10985).

The fact that there is no right of redemption during savings (which is the case for the PER with exceptions, the Madelin or the Préfon), just like the fact that the rights born from this savings are exclusively personal or the fact that retirement savings only result in an annuity, all these modalities are of little importance in view of the reward due to the community in the event of divorce.

And the capital gains or losses?

The question remains whether the award should be calculated based on payments made during the marriage or whether it should reflect the value of retirement savings at the time of divorce. In short, should we take into account fluctuations in value, downward or upward, that occur during the contract? A priori, it is “the rights arising from the supplementary retirement contract” – according to the expression of the 2018 judgment – ​​which come into account, and therefore the value at the time of divorce. The new ruling also mentions “future sums over which the insured has a right”.
Finally, let us emphasize that retirement savings financed by the company, obviously, do not generate any right to reward.

(Cass. civil. 1st, October 2, 2024, n°22-20.990)

GOES