Saving between 40-60 years: thinking about retirement and taking out a PER

Created in 2019 by the Pacte law in order to rationalize a range of retirement products that had hitherto been protean and often off-putting, the PER is actively expanding its place in the panoply of household savings. At the end of July, there were thus 3.4 million subscribers to insurance PERs (mostly individual offers) for a total outstanding amount of 42.9 billion euros.

This breakthrough seems to attest to an accelerated awareness of the French as to the need to anticipate their retirement financially. But to be effective this passage to the act calls for a few prerequisites.

1. Clearly identify the proposed management methods

Essentially providing a good investment horizon, the PER, which comprises on average 61% of units of account (UA), makes it possible from the outset to diversify one’s savings and smooth one’s risk taking over time using two types of management: time-based management and free management.

The first, which is imposed by default on the subscriber, has the advantage of simplicity. Managed according to the time that separates the saver from retirement age, this delegated management complies with an evolving asset allocation grid. Ten years before the liquidation date, the share of low-risk vehicles is gradually increasing to become the majority.

This grid is divided into three risk profiles (moderate, balanced, offensive). It is the same for all PERs; the insurer, on the other hand, retains control of the content of each allowance. For example, a subscriber who still has 5 to 10 years ahead of him before retiring will hold, in a balanced profile, at least 20% of low-risk assets.

Often costly, delegated management leaves little latitude to the insured who may prefer free management.

Often expensive – PER fees have been since 1^er June the subject of a mandatory summary that it is recommended to consult before subscription – this delegated management leaves little latitude to the insured who may prefer free management.

However, this requires having the time and the skills required to arbitrate wisely and to cut the pear in half, several distributors (in particular online brokers) have developed “semi-piloted” management (mandated or advised) organized around target themes. “Our three PERs ‘Climate’, ‘Responsible ETF’ and ‘Solidary’ are all built on a selection of labeled funds whose allocation is done in the logic of time-bound management”, testifies for example Olivier Rull, co-founder of the fintech Caravel. In the same vein, Yomoni has been offering for a few days, in partnership with Altaroc, a “turnkey” range of private equity which aims for a net return target of more than 10% per year.

2. Weigh the tax advantage

Voluntary payments made under the PER are deductible each year from taxable income within comfortable limits (32,908 euros and up to 76,101 euros for self-employed workers in 2022). The saver also has the possibility of benefiting retroactively from the unused deductibility ceilings of the three previous years and of pooling this potential surplus with that of his spouse. It should be noted that expatriates who are not eligible for this deduction when they are abroad will be entitled to a “reserve” of four ceilings upon their return.

Very attractive, this tax gift, which applies in priority to people taxed at 30% or more, induces a good leverage effect in the capitalization phase (schematically 10,000 euros invested by a subscriber taxed at 30% correspond to a savings effort of 7,000 euros, but it is indeed 10,000 euros that bear fruit).

You should never forget that when you leave, savings will be taxed.

But, the devil always hiding in the details, it is advisable “to quantify this advantage on an individual basis, to optimize each year the amount of its contributions according to the evolution of its income while systematically taking into account the other devices – employer contribution paid into an employee savings plan, compulsory supplementary pension contributions, etc. – also deductible from the envelope defined by article 163 of the general tax code. Finally, we must never forget that when leaving, savings will be taxed,” sums up Christophe Olivier, managing director of My Pension xPER.

This broker-advisor, specialist in pensions, has developed individualized simulation tools on its website. The capital accumulated on the PER, whether it is recovered in one go or split over time, will in fact be subject to IR (income tax) excluding capital gains (taxed at the PFU – single flat-rate deduction – from 30 %).

Finally, if you opt for a life annuity, it will be taxed as a retirement pension after a 10% reduction. Many professionals thus agree in considering that the TMI (marginal tax rate) must melt by a slice or two at the time of retirement, so that the subscription of the PER is generally beneficial on the tax level.

3. Anticipate the outcome of the plan

The PER, blocked by definition until retirement, has significantly gained in flexibility compared to previous systems (PERP, Préfon, Madelin, etc.) by allowing a 100% capital exit in the long term. Another asset, likely to be settled at any time tax-free in the event of life accidents (death of the spouse or partner of a PACS, disability, over-indebtedness, etc.), the PER can also be “broken”, subject to taxation, to buy his principal residence. Finally, nothing prevents you from keeping your PER for as long as you want beyond the end of retirement.

This appreciable flexibility can however be trimmed at the margin by the insurer (a contract which allows for example to take out 50/50 in annuity and in capital could stipulate that the share of cash be paid in one go and not diluted in time) and a careful reading of the contractual conditions is essential before subscription.

Finally, do not forget, if the holder of an insurance PER dies before the outcome of his plan, the beneficiaries designated in the clause drafted for this purpose (with the help of a notary if necessary) will benefit from an abatement 152,500 euros on the sums transmitted (then 20% tax up to 700,000 euros, then 31.25%) provided that the deceased is under 70 years old. If he is older, this deduction (which is common with that of life insurance and not cumulative) is reduced to 30,500 euros and beyond that the classic inheritance tax regime applies to capitalized sums, interest understood.