The Retirement Savings Plan in the Face of Tax Challenges

The Retirement Savings Plan (PER), often used in conjunction with life insurance, offers attractive tax benefits, particularly with regard to the transfer of assets. These advantages, which have long been in place, are now, however, being called into question by parliamentary debates.
 

A Tax-Advantaged but Criticized Framework
The PER, when used in a life insurance policy, benefits from a specific tax regime in the event of the policyholder’s death. If the policyholder dies before age 70, each designated beneficiary may receive up to €152,500 tax-free. Above that amount, a 20% tax applies up to €700,000, then 31.25% on amounts exceeding that threshold. After age 70, the rules change: the tax-free allowance is reduced to €30,500 for all policies held, and any amounts exceeding this are included in the estate and subject to the standard inheritance tax schedule.
However, this favorable tax treatment has drawn the attention of lawmakers, particularly in the context of discussions on the 2025 finance bill. Some elected officials have criticized these tax “loopholes,” arguing that they disproportionately benefit high-net-worth individuals.
 

Two issues are under fire. First, the tax deductibility of contributions
Contributions made to a PER are deductible from taxable income during the accumulation phase. However, if the account holder dies, the amounts paid out to beneficiaries are exempt from income tax (IR) and social security contributions. Some lawmakers consider this double exemption excessive. A proposal has been made to subject the amounts received to income tax while deducting them from the estate’s assets in order to avoid double taxation. Although rejected for now, this idea could resurface in future debates.
 

Second point: age limits for enrollment and withdrawal
Currently, there is no age limit for enrolling in or contributing to a PER. This allows, for example, an older person to keep this plan beyond retirement age, deferring its use for future needs such as long-term care. However, this flexibility is perceived as a windfall. One proposal suggests restricting enrollment after age 67 and requiring the PER to be cashed out at age 70.
 

A Possible Change to the Tax Regime
One particular aspect of the current regulations deserves attention: in the event of death before retirement age, the savings passed on are subject to the tax regime for retirement savings plans. This means that only the last premium paid is included in the taxable base, not the total funds in the plan. This provision, resulting from a recent administrative update, could be revised as discussions progress.
 

What Does the Future Hold for the PER?
The PER remains a powerful tool for estate and wealth planning. However, the proposed reforms could reduce its appeal, particularly for high-net-worth individuals. Savers should stay informed about potential changes and adjust their strategies accordingly.