French government introduced back in 2019 the PER (Plan d’Épargne Retraite) in France as a complementary retirement savings plan. It is a measure targeting to support the retirement collective fund system.
In this blog, we will give the key information on this topic that you need to know as an expat or foreigner living in France. Let’s start…
Table of Contents
What is PER (Plan d'Epargne Retraite) in France?
It is a long-term savings wrapper designed to help individuals save for their retirement by allowing tax-deductible contributions, meaning that individuals can reduce their taxable income by the amount they contribute to the plan. It is similar to the 401k in USA.
Withdrawals from the PER are generally allowed at retirement age, although there are specific conditions under which early withdrawals can occur, such as in cases of disability or purchasing a primary residence. Overall, the PER is designed to promote long-term savings for retirement while providing individuals with some flexibility and tax benefits.
The aim of the PER is to encourage people to save more for their own private retirement, and to provide them with better financial security in their later years.
PER combines the advantages of different existing savings products, such as Perp, Madelin, and Article 83, into a single plan. It is available to both employed and self-employed individuals. They can choose between individual or collective plans.
This individual retirement saving plan is very important for French residents, as the public social security system is France may not be able to support the retiree needs funded only by a decreasing young & active contributors.
Only french residents has the right to own a PER. So if you are a foreigner, but not paying taxes in France, sorry you cannot benefit from it.
Importance of PER retirement savings plan in France
PER retirement plan helps ensuring financial security during retirement years.
The French pension system is based on a collective distribution model. This means that the current workforce contributes to a common pension fund. This common pot pays the benefits of those who are retired.
However, due to an ageing population and increasing life expectancy, the French pension system is facing challenges. The main causes are a potential decrease in the pension for future retirees, and / or extension of legal retirement age.
Therefore, it is essential for individuals to have a retirement plan to complement their state pension and maintain their standard of living during retirement.
What are the different PER types in France?
PER Individuel (PERIN)
This type of PER account is for individuals who want to save for their retirement on their own. It is open to any french resident, regardless of their employment status.
The PERIN allows individuals to make voluntary contributions and benefit from tax advantages. As example: tax deductions on their contributions and tax-free growth on their savings.
Depending on the individual’s age and circumstances, the money can be withdrawn as a lump sum or as a regular income stream during retirement.
PER Collectif (PERCO)
This type of PER account is for employees of a company who want to save for their retirement.
It is set up by the employer and can be offered as a benefit to employees who can contribute a portion of their salary. In addition, their employers may also provide matching contributions.
The money saved in a PERCO plan can be invested in a range of investment options, including stocks, bonds, and mutual funds.
At retirement, the saved money can be withdrawn as a lump sum or in regular payments.
PER Obligatoire (PERE)
This type of PER account is mandatory for employees of a company. The employer is required to set up the account and make contributions on behalf of the employee.
The plan is funded by contributions from both the employer and the employee. All employees in France are required to participate in the PERE plan.
The employer must offer a PERE plan to employees who have been with the company for at least three months and work min. 1,000 hours per year.
The amount of contributions is based on the employee’s salary, age, and length of service.
Advantages of PER in France
Tax benefits
First main advantage of PER is the tax benefits it offers:
Contributions made to a PER account are tax-deductible, meaning that individuals can reduce their taxable income by the amount of their contributions. This is particularly advantageous for high earners who want to reduce their tax bill.
Additionally, the money in the account grows tax-free, and withdrawals made after the age of retirement are normally taxed at a lower rate (as most likely your income tax range TMI should be lower).
In few words, your income tax is exempted at the entry but not at the exit.
Example of tax savings
For an annual income of 100k€, you would pay around 25k€ of income taxes. If you invest 10k in your PER, then you can deduct this amount from the total taxable, which will turn then in 21k€, meaning 4K€ less in taxes applied for the current fiscal year. But do not forget that you will pay taxes when unlocking that money in retirement. There is no free lunch! (above example is just illustrative, do not take it as tax advice).
Flexibility
Secondly, PER is very flexible (similar to an ‘Assurance Vie‘):
You can choose from different investment funds based on your risk tolerance and investment goals. The plan also allows you to make contributions when you want, so you can adjust your savings strategy according to your financial situation.
Employer match
Thirdly, the PER gives you the opportunity to save for retirement with an employer contribution or match:
This means that your employer can contribute to your retirement savings, which can help boost your savings and give you more financial security in retirement.
Inheritance ready
Finally, there is an interesting benefit about inheritance:
You can assign a PER beneficiary in case you pass away and the inheritance will not pay income taxes.
Disadvantages of PER in France
The main inconvenient of PER is its lack of liquidity:
Individuals cannot withdraw money from their PER account before the legal retirement age (64 years old in 2024, maybe more later), except in certain circumstances, such as disability or serious illness.
Early withdrawals made before the legal age, are subject to a penalty and may pay full income tax. So for a young individual (far away from retirement), there are other
Another constraint of the PER is that it is only available to French residents:
If you are a foreigner living in France, you can contribute to a PER, but only if you are paying taxes in France.
This can be a significant limitation for foreigners who may have to leave France and relocate to another country in the future.
The final point concerns the high fees associated with PERs. Many French individuals are eager to reduce their tax burden, which has led banks and financial advisors to profit significantly by offering financial products with substantial fees. It’s essential to thoroughly evaluate these costs before committing to any subscription.
What are the valid reasons to unblock PER funds in advance?
- Life accidents: handicap (yourself, children, couple), couple’s death, unemployment end of benefits, over-indebtedness.
- Main residency purchase. Even if it is not the 1st one.
Notice that you will not pay income tax (only social contribution tax of 17,2% on capital gains) if the early withdrawal correspond to a ‘life accident’ category.
If it is due to the acquisition of your main home, you will income tax on the contribution you made and pay flat tax (of 30% during 2024, maybe more later) on capital gains.
myFrenchMoney tips
It could be wise to accelerate your PER contributions if you are 10 years away from retirement. At this age, normally you should have paid your home and have more extra cash available to invest. If you are young, there are similar investment wrappers but more flexible (like the PEA).
As well, you may have better visibility about your future tax range or TMI that will help you decide if contributing makes sense or not.
An ideal PER, would be one online, managed by yourself, with low fees and with a large investment options (ETF's, bonds, etc.).
Our experience and final thoughts about PER
When we were less than 40, at the time we had some many other priorities and retirement seems so far away concern. We were just limiting our contributions to the PERCO (Collective PER) as our companies were proposing to match the amount invested (depends on each company policy).
Additionally, we could monetize the days off or ‘congés payés’ saved in our CET (Compte d’épargne Temps). So basically, our PER contributions represented ZERO cash out from our pockets, but we were still contributing to our retirement thanks to our company and CET saved days.
Now that we have crossed the 40 barrier – but still young 😉 – and have some extra cash to invest, we have started to contribute just a bit more. We would prefer other investment wrappers in France, such as the PEA, or AV considering its tax advantages and liquidity (money not blocked 20+ years).
When we will turn 55, it could be a good time to reach out a financial advisor to finetune our retirement plan and increase our contributions to our PER.
In case you are still hungry for ideas to pay less taxes, here our blog ideas to reduce your tax bill.
Please do not forget to leave your remarks and comments below or contact us if you want to exchange more. In case you want to learn more, here the link to the official government site. Finally, do not forget to discover the ultimate guide to manage your money with our “Personal finance in France -Expats guidebook ” and unlock the secrets to thriving financially while living in France.
All the best!
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This is very interesting. Do you know how a PERIN would eventually be taxed if I took one out now as a French resident but was back in the UK when I reach retirement age?
Hi. You may need to contact a tax expert for you specific case but I guess it will depends on the tax laws in place in both countries at the time of your retirement. Normally the French gouv. would withhold taxes when you withdraw from your PERIN. You may be able to avoid double taxation when living in UK. Our opinion about PERIN is that it makes sense only if you are less than 10y away from retirement. Else, we would invest either in a PEA (to optimize taxes). Thanks for contacting us. Good luck
Great article Erick, thanks!
I agree that it is a good idea to plan ahead and save for retirement. The earlier the better, but it’s never too late. The tax deduction you get from contributions to a PERCO is a very good advantage. Even if your marginal tax rate at retirement is the same as, or not much lower than your rate while you are working, you still benefit by delaying the tax payment, and by getting tax-free growth on your investments over a number of years.
Thanks Philip for your comments. Yes, in fact it is always a better choice than doing nothing for your retirement and PER has definitively some good advantages. The key points of attention would be high fees behind, return rate of assets invested, and the fact that for young people there might be other wrappers with less constraints and similar tax exemptions (PEA for instance).