Pension savings:4 rules for maximum from PIR

Created under the Pacte law to simplify and harmonize various existing pension savings schemes, the retirement savings plan (PER) allows individuals to set aside money to supplement their retirement income. Although the funds remain locked until the legal retirement age is reached, the PER offers several advantages, including the ability to deduct contributions from taxable income and the option to receive savings as an annuity or a lump sum - at one's choice. Savers are not mistaken: according to the Ministry of Economy and Finance, over 7 million people owned one by the end of 2022, with total savings exceeding 80 billion euros. "The PER is a well-established product that surpasses all fundraising goals," comments Éric Rosenthal, Deputy General Director of Savings and Financial Services at Apicil. Here are our tips on how to make the most of it.

There are several types of PER:

• Individual policies that can be arranged by anyone at their bank or with an insurer.
• Collective and mandatory PERs, intended for employees of the companies that provide them. The first replaces Perco (the collective pension plan), while the second replaces the pension contract "Article 83".

Payments under these schemes are not always known to the recipients. However, 1 in 4 employees has a PER. "Thus, they can access a competitive investment product, as the company covers the costs of the savings scheme, which have also been pre-approved," emphasizes Benjamin Pedrini, CEO of Epsor.

In this case, the design of an individual product is not mandatory.

Especially considering that free (tax-deductible) contributions can also be made to these schemes. "One is not the enemy of the other. It all depends on the goal, but it should be remembered that the mandatory PER only allows for receiving an annuity," emphasizes Eric Rosenthal. Mixing contributions in the two schemes can sometimes be beneficial, especially since corporate schemes traditionally offer simpler financial instruments than individual PERs. "Historically, the types of available assets in these collective schemes have been very limited. However, with the introduction of the Pacte law, we can include passive management, private assets, real estate, etc.," says Benjamin Pedrini.

Another aspect to consider is:

Most corporate PERs are structured as title accounts, while individual PERs are primarily based on insurance policies. This implies different legal and tax treatment in the event of death. "An insurance PER allows for the designation of beneficiaries who will receive death benefits under favorable life insurance terms," says Christine Valens, a wealth tax engineer at BNP Paribas banque privée. However, the amounts accumulated in PERs structured as title accounts are included in the estate in the event of the owner's death. "They also do not have a guaranteed minimum death benefit, which helps offset losses in the event of death during a market downturn," emphasizes Alexander Buten, director of wealth engineering at Primonial.

The strength of PER lies in its tax leverage.

which allows you to build a pension capital while simultaneously reducing taxes. However, it is important to remember that the funds exempt from taxation at the time of contribution will be taxed upon withdrawal. The operation is still interesting, especially for families anticipating a decrease in income - and therefore taxes - during retirement.

First, check your pension limit, which determines the maximum amount eligible for deduction. You can make contributions of up to 10% of your income for 2022, with a minimum set at 10% of the annual social security threshold (Pass), which is 4,114 euros for this year, and a maximum set at 10% of eight times the Pass value, which amounts to 32,909 euros. Additionally, you can use any unused limits from the past three years. These amounts are indicated in your tax notice, but they do not take into account any contributions that may have already been made during the year.

To increase this amount, you can combine your limit with your spouse's or partner's limit under Pax if they are not using it fully. The last option to enhance the PER tax impact is to open and fund an account for each of your children linked to your tax family.

Preliminary check the tax impact. The higher your marginal tax rate, the more significant this will be. For a taxpayer in the 41% bracket, a contribution of 10,000 euros will save 4,100 euros in taxes. For a 30% rate, the discount will be 3,000 euros, and so on. "At a rate below 30%, the tax leverage becomes very weak," advises Alexander Buten.

Depending on your income, you may not have the same opportunity to save. "First, check if you are receiving any additional funds from your company," says Benjamin Pedrini. This could be a bonus related to contributions. But it can be spread out over the remaining four months of the year. Another option, available only to employees who have left: to contribute unused vacation days.

To avoid the scattering of accounts and forgetting them, the Pacte law provides for the possibility of transferring capital accumulated in various pension contracts signed during active life to the PER. "The logic is this: it doesn't matter what professional path one takes, which can be variable; there is a single solution," explains Alexander Buten. This applies to new plans as well as old products (Perco, Article 83, Perp, and Madelin).

“Before transferring the old contract to PER, several factors should be considered,” warns Christine Valens. There are several cases that may prompt one to keep Perp and Madelin. Firstly, even if these plans provide for a payout in the form of a lifetime annuity, the insurer would prefer to pay out capital if it is insignificant. This occurs when the annuity is less than 110 euros per month, which roughly corresponds to capital of 35,000-45,000 euros, depending on the Union financière de France (UFF). “In this case, you can withdraw the capital, and the taxation will be more favorable than with PER, as the tax is only 7.5%,” explains Valérie Bentz, head of wealth research at UFF. Capital withdrawal is also allowed in the case of Perp when purchasing a primary residence, provided that you have not been an owner for two years. Finally, “the guarantees provided in the Madelin contract should be examined, including the presence of a mortality table, which can offer the contributor certain conditions for conversion into a predetermined annuity and sometimes advantageous ones,” emphasizes Christine Valens. This is an advantage to consider, even if you are not a fan of annuities...

If a PER allows for the creation of an additional source of income in retirement, it can be transferred if not all of the accumulated capital is used. In the event of death before the age of 70, a life insurance scheme applies with a benefit of €152,500 for the beneficiary. After that, amounts are subject to inheritance tax after a deduction of €30,500, which applies to all recipients and all contracts. However, it should be noted that a spouse or partner under a PACS is exempt from tax. In this case, "the PER becomes a real protection tool for the spouse, as in the event of death, they receive the capital, if they are the beneficiary of the contract, without the need to pay taxes or social contributions," says Valérie Bentz. The tax advantage obtained at the time of contribution remains preserved.