PER – Plan Epargne Retraite: French Retirement savings account for reducing taxes

Do you know that funds invested into your retirement accounts like PER can help reduce your income taxes in France?

What is PER?

Plan d’épargne retraite (PER), a type of long-term retirement savings account that regroups all old and existing retirement savings options into 3 categories.

1. PERIn – PER individuel
2. PER d’entreprise collectif (from your Employer)
3. PER d’entreprise obligatoire (from your Employer)

These new PERs are available since 1st October 2019 and gradually replace all the old options like PERCO, PERP, Madelin, etc. This article explains PERIn in detail.

Payments during the course of a financial year (Jan-Dec) are deductible from the taxable income of that year, within the limit of an overall ceiling for each member in the household.

The maximum limit of investments eligible for tax reduction is equal to the higher of the 2 following situations:

10% of the professional income of 2022, net of social security contributions and professional expenses, with a maximum deduction of 32 909 €, or €4,114 if this amount is higher.

If you haven’t used the tax benefits for this year, it can be carry forwarded to 3 consecutive years. To know more, read this article from Service Public

If you don’t deduct these payments from your taxable income, you will have a tax advantage when you withdraw funds after retirement. The withdrawals will be tax-free.

Why is a PER required?

• To create a long term retirement corpus, while you are actively employed or doing a business.
• To reduce your taxable income, especially when you are in 30% tax bracket or higher. Explained using an example later.

How to open a PER account?

• PERin account with your bank, insurances, third-party brokers, etc.
• Other 2 PERs only via your employer.

Some options for PERin accounts:

1. PERIn MATLA from Boursorama Bank.
2. Other Banks like BNP Paribas, etc
3. Boursdirect
4. Yomoni
5. Linxea

When to invest?

• Regular monthly payments or few lump-sum payments based on your account terms and conditions.
• Irrespective of the automatic or manual payments, the funds will be invested based on the mandate chosen during account opening. However, the investment mandate can be updated. 
• Payments made between 1st January and 31st December are eligible.

Example 

To know the tax benefit, you have to multiply the total amount invested in PER with your tax rate (called taux marginal d’imposition “TMI” in French)

For example, if your tax rate is 30% and you had invested 5000€ in 2022, you can reduce 1500€ from your taxes. 

5000€ x 11% = 550€

5000€ x 30% = 1500€

5000€ x 41% = 2050€

5000€ x 45% = 2250€

You can do an online simulation available here.

Fund Withdrawals

• Can be partially or completely withdrawn at retirement including monthly withdrawals as pension.
• Can be withdrawn before retirement, based on some exceptional situations such as

Disability (you, your children, your spouse or your partner)

Death of your spouse or PACS partner

Expiry of your rights to unemployment benefits

Bankruptcy

Buying your first house

Sources & References

1. PER https://www.economie.gouv.fr/PER-epargne-retraite
2. PER https://www.service-public.fr/particuliers/vosdroits/F34982
3. FAQ
4. French Income tax slabs