The outlook for the retirement savings plan (PER) is clouding over a bit more
On November 7, the Court of Auditors issued a report recommending that the scope of the tax benefit associated with the PER be narrowed, in particular by reviewing the options for carrying over deduction limits from one year to the next and the amount of the annual deduction limits.
As a reminder, voluntary contributions to a PER are deductible from taxable income, subject to a dual limit of 10% of salary and 8 times 10% of the annual Social Security ceiling. This limit applies to an individual PER held by an employee. In other situations, such as for self-employed individuals, the deductibility limit applies but is calculated differently.
Another benefit unique to the PER is that if a taxpayer does not fully use his or her deduction limit in a given tax year, he or she may carry it over to the following three years. It is this aspect that the Court of Auditors proposes to review.
To justify this, it points in particular to the cost of the tax benefit relative to the number of people with a PER. “In 2022, retirement savings accounted for only 5.1% of retirement contributions and 2.3% of benefits,” states the Court of Auditors. However, tax and social security deductions “represent a significant cost to public finances, estimated at 1.8 billion euros in 2022, excluding mandatory group retirement savings,” it notes.
The PER's commercial success continued after 2022. As of the end of March 2024, 10.4 million French people held a PER, according to the Ministry of the Economy, with total assets of 108.8 billion euros.
The Court of Auditors also believes that the PER’s impact on the economy and the financing of productive investment is insufficient. According to its calculations, based on data from France Assureurs as of the end of 2022, 30% of the funds would have been used to purchase corporate bonds, compared with 32% for life insurance and 34% for retirement savings plans such as the Perco, which preceded the introduction of the PER in October 2019.
Since then, the Green Industry Act, which took effect in late October, aims to address this criticism to some extent by requiring that investments in PERs consist of unlisted securities managed under a discretionary, time-horizon-based mandate.
The publication of this report comes a few weeks after the release of the report by the “fact-finding mission on the taxation of funded retirement savings,” launched at the initiative of the Horizons group. Its rapporteurs, Representatives Charles de Courson and Félicie Gérard, also recommend scaling back certain tax benefits of the PER, particularly when the account holder dies before the contract is settled. Consequently, voluntary contributions deducted from the holder’s taxable income are never subject to income tax.
In fact, while it is possible to deduct contributions from taxable income upon contribution, the legislature has provided for a catch-up tax upon the contract’s maturity. When a new retiree cashes out the contract, he or she is then taxed. However, if the policyholder dies before cashing out the policy, the accumulated funds transferred to the beneficiaries are taxed only as part of the estate, which represents a net loss for the government budget, the report’s authors note.
As early as January 1 of this year, the PER had already undergone an initial round of cuts following the passage of the 2024 budget law. Parents can no longer open a retirement savings plan for their minor children or make new contributions to existing PER accounts until the children turn 18.
