If you are working in France, your company may propose to you to participate within their ‘Plan d’Epargne Entreprise’ – PEE (company savings plan). For us, it has been a great opportunity to save and invest while profiting its tax advantages. Its success is reflected on the fact that more than 31% of French employees have subscribed to a PEE.
Nevertheless, it is not easy to understand. This is why we have created this blog to share with you our knowledge and experience to help you making the best decision. Let’s start!
Table of Contents
What is a 'Plan d'Epargne Entreprise' PEE in France?
It is a tax-advantaged savings scheme where employees have the option to contribute a portion of their salary to the plan, and employers can also proportionally match or contribute to a max. of 3709,44€ per year. The funds in the PEE can be invested in a range of financial products, such as stocks, bonds, and mutual funds (called FCPE ‘Fonds Commun de placement d’Entreprise’).
Employees can access the funds in their PEE under certain conditions (see more in section below). In most cases, it is up to you – as an employee – to decide if you want to participate or not. We believe it is worth exploring it and understanding your company’s plan as it could be a great long term saving opportunity.
Notice that not all companies are proposing this saving plan to their employees. It is mainly available to employees of large companies. 82.8% of employees have a PEE in companies with more than 1000 people, compared to 10,4% with less than 10.
This graphic represent the key points to understand about PEE in France and that we will explain further down this blog:
How can I add funds to my 'PEE' company savings plan?
Your company saving plan ‘PEE’ could be fed by multiple means:
Your own money
First option will be investing your ‘Intéressement et Participation‘. Around 64% of French employees decides to contribute to their PEE (source: OpinionWay 2023) with their bonus, instead of withdrawing it. Around 67% of total funds are coming from this source. It indicates the national trend when deciding about it.
Second most popular source will be through voluntary deposits (versements volontaire). This is extra money you have in your bank account that you want to invest in your company savings plan. Notice you have a limit of 25% of your annual gross salary that you can invest in a PEE.
Last option (rarely available for PEE) will be monetizing your days off saved in your CET (Compte d’Epargne Temps). Your company will calculate the equivalent in euros of your saved days and transfer and transfer it to your PEE account.
Your company’s money
Some companies (not mandatory) propose matching (abondement) the amount invested by the employees (with certain limitations and rules), punctual amounts decided by your company, free stocks given to you, or stock options.
Check in you company the maximum matching amount. By law, company contributions are limited to 3709,44 € x year (or 3 times your contribution) or 6676,99€ if invested in the same company’s stock. In reality, the average match amount are much lower (around 843€ in 2021).
Another important point to check is the matching rules. Some companies put in a place a progressive scheme. For example, they will match 100% of your contribution up to certain amount. Then, the matched % could be lower (ex: 50% of your contribution).
How to manage my company's PEE 'Plan d'Epargne Entreprise'?
Normally your company could propose to you multiple funds corresponding to the different investment profiles & risk. You will normally find mutual funds which as ISR label (Investment Socially Responsible), bonds (low risk & return), diversified funds, or even your own company stock. You could transfer money from one fund to another, however some restrictions and fees may apply.
We select the fund to invest depending on our project timeline and risk tolerance. For instance, if we have a short term project (ex: buying a new home during next 2 years), then we will select to invest in a low risk fund to avoid market volatility that can jeopardize our project. If it is for long term, then we are ok to take more risk looking for higher returns.
You can decide by yourself how to allocate your savings or you can delegate (gestion pilotée) to an external broker – who will probably make a mixed investment (bonds vs stock) based on your age (the younger = higher the risk). You can ask your CSE (Comité Social Enterprise, or union) for more information on this topic.
What are the benefits and constraints when investing in a PEE?
Let’s start with the benefits:
- Contributions, gains and dividends are tax exempted (except 17,2% of social contributions CSG-CRDS) after the 5 year retention period.
- In the long term, investing in the stock market could be more rewarding compared to keeping your money sleeping in your bank. Of course, it will depend on the stock and funds you select. It is a common recommendation to diversify your investments.
- Your company contributions (abondement) could be interesting to minimize your risk (in case of stock crash for example) or maximize your gains. It is free money! Why give it up?
One main constraint:
- Lack of availability of your money as it will be locked during 5 Years – unless you apply one of the early unblocking conditions (cas de déblocage) listed below.
What are the early unblocking conditions (cas de déblocage)?
There are some conditions allowing you to unblock it earlier, following a happy life event or some more unfortunate event. Here the list:
- Marriage,
- 3rd child birth (or adoption),
- divorce,
- marital violence,
- buying or constructions in your home (‘residence principale’)
- Works to make your home energy efficient (since July 2024)
- handicap (you, spouse, children),
- passing away (you or your spouse),
- closure of you work contract,
- creating your own company,
- over-indebtedness,
- Your partner is a caregiver (Since July 2024),
- To buy an electrical car or bicycle (Since July 2024).
Notice that you will need to claim to unlock your money 6 months max. after the occurrence of these events (except contract closure, death, handicap or over-indebtedness) and you can apply the same early unblocking reason only once.
Finally, we recommend to check in advance when unblocking the funds as there are many small foot letters and special conditions to fulfill. Example: Unblocking fund to buy a house but through an SCI (Société Civil Immobilière) are not allowed.
PEE vs PERECO
Those are different financial wrappers with different purposes. The ‘PEE’ is meant to encourage French tax residents to invest in the stock market with a mid / long term time period as explained above.
The PERECO (or PERCO) is for retirement complement of the social security. This means your funds will be blocked till you reach legal retirement age. However, there are as well early retirement conditions for a PERECO but less reasons and more restrictive than a PEE.
Good point for PERECO, is that you may get as well the company match (7419€ x year Max.) and it is more commonly accepted by companies to monetize your days off saved (CET).
So if you are far from retirement and / or want to have available your funds after 5 years of holding period, it may be interesting to prioritize investing on your PEE stock saving plan.
Plan d’Epargne Entreprise - Taxes
During the 5 year lock period:
- Your voluntary payments (versements) are not deductible from your tax return.
- Interest generated within the account are exempted from income tax (if reinvested) however it will not scape from social contribution tax (9,2%)
- If you withdraw funds before the 5 years period, you will be subject to income and social contribution taxes
If early unblock (déblocage):
You will pay social contribution tax on your capital gains, dividends and interests.
At the end of the plan:
Same as early unblock – only social contribution taxes.
Is it worth it to invest in a Plan d’Epargne Entreprise in France?
It has been worth it for us during the last years. We have been lucky considering that the companies we’ve worked for have been doing great financially speaking and they have proposed good conditions (important matching amount + discounted stock prices for employees).
Hence, it plays a lot into the conditions and investment options defined by your own company, and the evolution of the stock market but considering the benefits, most of the time it turns out to be a good investment for employees (not financial advice, what worked for us may not work for you).
We like to diversify our investments within the company saving plan (putting eggs in multiple baskets!) and minimize our risk by transferring the funds from our company stock (after the 5 years hold period) to a diversified or a lower risk fund. Even if we are convinced about the bright future of our companies, it is always good to make some profit from time to time.
Conclusion
From our own experience, investing in a company stock saving plan is something that has worked well for us. It has more benefits than constraints, but this could vary from company to company.
A good idea will be asking your colleagues or your CSE to understand the options available in your company and the best strategy to invest. You can learn more from the official french government site here to keep learning.
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Bon chance!
Disclaimer
Please remember that we are neither financial nor tax advisors. We are just sharing our best understanding based on our own experience. This blog is for educational purposes only. Do not make investment decisions solely based on what you read in this blog. What works for us, may not work for you. Do your own research and look for professional service if required. Read our full disclaimer in the ‘about’ page.
