If you are an expat 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 taking profit of tax advantages. We are happy to share with you in this blog our knowledge and experience in this subject. Let’s start…
Table of Contents
What is a 'Plan d'Epargne Entreprise' PEE in France?
It is a saving scheme available for any french companies allowing employees investing collectively in the stock market. In most of cases, it is up to you – as employee – to decide if you want to participate on it or not. We believe it is worth to explore it and understand your company’s plan. Let’s deep dive a bit more…
The money invested within a ‘PEE’ could placed directly in the company’s stock or in investment funds (FCPE – ‘Fonds Commun de placement d’Entreprise’). Meaning that your future gains or loss depends on your company stock or the selected fund(s) performance.
How to invest with my company's PEE 'Plan d'Epargne Entreprise'?
Normally your company could propose to you multiple funds corresponding to the different investment profiles & risk (french or international bonds, stocks, funds, etc…).
You can decide by yourself how to allocate your savings or you can delegate (gestion pilotée) on an external broker – who will probably make a mix investment (bonds vs stock) based on your age (the younger = higher the risk).
Normally your CSE (Comité Social Enterprise, or unions) can provide to you 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 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. We recommend 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 giving 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).
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. Here the list:
- 3rd child birth (or adoption),
- marital violence,
- buying or constructions in your main house,
- handicap (you, spouse, children),
- passing away (you or your spouse),
- closure of you work contract,
- creating your own company,
Notice that you will need to claim to unlock your money 6 month max. after the occurrence of this events (except contract closure, death, handicap or over-indebtedness).
How can I add funds to my 'PEE' stock saving plan?
Your stock saving plan ‘PEE’ could be fed by multiple means:
- Your own money: You could invest your ‘Intéressement et Participation‘, monetizing your CET (Compte d’Epargne Temps), or voluntary deposits (versements volontaire). Notice you have a limit of 25% of your annual gross salary.
- Your company’s money: Some companies propose matching (abondement) the amount invested by the employees (with certain limitation and rules), punctual amounts decided your company, free stocks given to you, or stock options.
Plan d'Epargne Entreprise or PERCO or PER?
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 PERCO (or PERECO) and PER are for retirement complements of the social security. So if you are far from retirement and / or want to have available your funds after 5 years of holding period, you may want 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).
Hence, it plays a lot 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 as a good investment for employees (not a financial advice).
We like to diversify our investments within the stock saving plan (putting eggs in multiple baskets!) and minimize our risk by transferring the funds from your 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 take some profit time to time.
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 advice 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 enrich your knowledge.
If you found this blog useful, please share it with friends and follow us in LinkedIn to receive more content like this. You can leave your comments below or contact us in case of any further question.
Please remember that we are neither financial nor tax advisors. We are just sharing our best understanding based in 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.