Taxation: Is the PER for Minors Coming to an End?

For now, you can take out a retirement insurance policy—in the form of a PER—for your children. But that could change in 2024.

When you open a PER account for your children, the savings you have set aside for them will be locked in until they retire, unless they decide to purchase real estate. In that case, they will be able to withdraw the funds from their PER account to make a down payment.

There are two benefits for parents! Not only can you manage this savings plan, but you can also deduct the contributions you make to this PER from your income taxes. 

For the record, the tax savings generated by contributions to the PER are not subject to the cap on tax breaks (10,000 euros per year per tax household). However, the law caps the amount of contributions deductible from taxable income at 10% of the annual Social Security ceiling (PASS) for the year preceding the year of the contribution. This amounts to 4,114 euros for a contribution made in 2022.

But be aware: opening a PER in the name of your minor children may soon no longer be possible. Until now, a legal guardian could open a retirement savings account on behalf of their children. As the legal guardian, you manage the account until they reach the age of majority and benefit from tax deductions on the contributions made. This is one way to take full advantage of this tax benefit.

The PER Replaced by the PEAC

However, if the 2024 Finance Bill is passed as is, it will no longer be possible for those under 18 to open a PER account. In fact, the bill provides for the creation of a “Climate Future Savings Plan (PEAC),” a new savings product exclusively reserved for people under the age of 21.

The creation of this plan designed for young people provides the government with an opportunity to restrict access to the PER. In the same Article 3 of the bill that establishes the tax regime for the PEAC, the 2024 budget “eliminates the possibility for minors to open a retirement savings plan (PER) in order to limit tax optimization behaviors related to the deductibility of voluntary contributions from the income tax base,” to quote the explanatory memorandum of the bill presented by the Ministry of Finance.

The bill submitted to Parliament includes the following provision: "The holder of an individual retirement savings plan must be at least 18 years old on the date the plan is opened." If the bill is passed as is, this measure will take effect on January 1, 2024.

According to the Ministry of the Economy, this provision follows the launch in 2024 of the Climate Future Savings Plan (PEAC). The plan is available only to individuals under the age of 21. "The goal of this plan is to enable these individuals to build long-term savings—largely directed toward financing the productive economy and the green transition—to prepare them for entry into the workforce," states the 2024 budget proposal.

With the PEAC, “we are creating a ‘little brother’ to the PER based on the same model—namely, a lock-in period and a fixed age for unlocking funds. For the PER, that age is retirement. For the Climate Future Savings Plan, it is the age of majority,” the French Ministry of Finance stated on October 3. Replacing the PER with the PEAC is a “step toward consistency, since the PER’s original purpose is retirement,” the ministry added.

These two savings products also have different tax characteristics. Specifically, the tax benefit of the PEAC is realized upon withdrawal of the funds, which will be exempt from income tax and social security contributions, whereas the tax benefit of the PER is realized upon contribution. Capital gains are expected to be exempt from income tax and social security contributions.

If it is confirmed that it is not possible to open a PER in a minor’s name, this will also have repercussions on plans already opened for children. Existing contracts with a minor as the account holder will be frozen. It will no longer be possible to make tax-deductible contributions until the child reaches the age of majority, according to the Ministry of Finance. However, it will be possible to close the PER and transfer the funds to a PEAC, the ministry states.