At a time when the question of financing retirement pensions is at the heart of debates and the replacement rate is decreasing, building up assets for retirement is becoming a major concern for the French.
The government also seems to encourage savers to turn to this type of solution by making funded retirement accessible to all, simplifying its mode of operation, and offering better prospects for returns.
The shock of simplifying the supplementary retirement system was initiated in 2018 by the PACTE law and the introduction of a single product: the Retirement Savings Plan (PER). This new product puts an end to the confusion around the old systems: PERCO, article 83, PERP… with heterogeneous and sometimes complex rules, which could frighten the saver. Even capital management has been simplified with the opening of managed management for all.
This attractiveness will be reinforced by the current pension reform which notably provides for a reduction in pension contributions on high incomes, allowing individuals to reallocate funds to retirement contracts.
The objective announced by the government is to increase retirement savings outstandings by 50% by 2022.
What are retirement savings?
Retirement savings define the additional schemes, which can be taken out by an active person or by the employer, in order to supplement old-age insurance benefits.
This system is available in two phases: A “savings” phase during working life and a “payment” phase at the time of retirement (except in specific cases of early release) which can be a retirement pension. lifetime (monthly payment) and for certain products, a capital outflow (payment of all or part of the funds).
Retrospective of the old system
Before the PACTE law, the products available were classified into several categories, depending on the nature of the subscriber.
These products are still marketed until 1 st October 2020.
The causes of a lack of popularity.
In 2019, French retirement savings represented only 4.6% (or € 230bn) of total savings (around € 5,000bn ).
The Minister of the Economy and Finance, Bruno Le Maire, evokes multiple causes at the origin of this lack of interest.
First of all, there are many constraints for savers:
- A large number of products, with specific tax rules.
- The unblocking situations are early too narrow and too specific.
- Low portability sometimes forcing savers to combine several products.
- The rigid output modalities, primarily annuity. Life annuity fees are high for low returns. This results in poor optimization of this type of investment.
In addition, the old system was not sufficiently attractive for companies:
- A low attractiveness to investors of these little solutions invested in shares not encouraging companies to offer this type of device.
- It a difficult to offer attractive products tailored to the needs of long-term savings.
Faced with this observation, the PER aims to clarify the market and the pension reform aims to strengthen the attractiveness of this product to savers.
What are the major changes induced by the PER?
Simplification at the heart of PER
The Retirement Savings Plan (PER) takes the form of a group insurance contract or a securities account. It can be taken out with an insurer, a mutual society, a provident institution, or even with an asset manager.
The RIP, launched on 1 st October 2019, brings together all the old features and is available in three categories according to the origin of the sums paid. These categories are watertight, once allocated, it is impossible for the saver to transfer his funds to another category.
This device will also be portable throughout the career of the saver. His contract will be transferable at any time to another insurer or manager, for 1% of the capital (and free of charge after 5 years).
The opening of managed management to all allows each saver to see his funds managed directly by the manager of the contract, depending on the level of risk he wishes to take. The great advantage of managed management is therefore to democratize investment in equities, thus guaranteeing better returns to savers.
1: Summary of PER characteristics focus on taxation, a still complex project
Entry tax: payments from employee savings plans and compulsory payments are tax-exempt for the employer. Regarding voluntary payments, they can be deducted for tax purposes from the income tax base unless the saver waives them.
Exit tax: exit tax remains complex and varies depending on the nature of the payment and the nature of the exit.
2: Fiscal terms of the PER
Consumers, what to do with your old products?
Savers will be able to keep and make payments on their old products. However, beyond the 1 st of October 2020, the sparing will benefit from the new arrangements.
Transfer to a PER compartment
The advantages of PER are multiple, nevertheless, some points of attention should be observed:
- For PERP of less than 2,000 euros, if no payment has been made over the past 4 years, there is a possibility of early exit which does not exist for the PER.
- Think about comparing annuities. Indeed, some old contracts have a better conversion into an annuity, or a guaranteed minimum annuity higher than the PER.
- For PERP, there is a possibility of a 20% capital outflow with a 7.5% tax, which does not exist for PER.
- For certain contracts opened through an association of savers, the transfer decision will be taken at a general meeting and may take place without the consent of the saver.
Finally, it will also be possible to transfer your life insurance over 8 years to a PER benefiting from a tax advantage, provided that this transfer takes place before January 1, 2023, and that the redemption is made at least 5 years before retirement.
These reforms are taking place in the context of low interest rates where the yields of many savings products are declining.
The PACTE law and the current pension reform aim to boost retirement savings by offering savers better prospects for returns thanks to managed management, in order to encourage investment in action.
Nevertheless, according to a survey carried out at the beginning of October by the FIFG: 90% of those questioned say they prefer “secure savings, which yield little but present no risk of loss” to “risky savings, which yield a lot but present a risk. of loss “.