RETIREMENT SAVINGS PLAN (PERIN)

Created by the "loi Pacte" and available for subscription since October 1, 2019, the new Individual Retirement Savings Plan (PERIN) is set to become a must-have of financial management in France in the coming years. Set up to standardise, simplify and make more attractive the different retirement plans that previously existed (PERP, Madelin, etc.), the main characteristics of PERIN are as follows:

 

1) During the savings phase, the subscriber can pay within the limit of 10% of his annual income on his PERIN, which will be deducted from his taxable income, thus automatically allowing him to benefit from the following year from a tax reduction equal to its marginal tax rate. Note that non-salaried workers ("Travailleurs Non Salariés" - TNS) benefit from additional deduction ceilings that we will not explain here to keep the presentation succinct. Therefore the greater the subscriber's income, the greater the tax reduction he can obtain each year by paying into his PERIN, up to 41% in the event of taxation in the higher marginal tax-band.

 

2) The sums held on a PERIN are then blocked until the subscriber's retirement, except in the following cases of early release:

 

- Accidents of life: death of the spouse or PACS partner, invalidity, over-indebtedness, expiration of unemployment insurance rights, compulsory liquidation. In these cases, a PERIN can be released without any applicable tax other than social security contributions on the capital gain, which in our opinion gives a very interesting foresight aspect to this multi-faceted product.

 

- New with a PERIN: in the event of the purchase of a main residence, a PERIN can also be partially or fully released. This time, taxation will apply since the sums released which gave the right to a tax reduction on entry, will be reintegrated into the taxable income of the subscriber, while capital gains will be taxed at a flat tax rate of 30% ("Prélèvement Forfaitaire Unique" - PFU). In our opinion, this option should be seen above all as a way out in case of necessity rather than an objective in itself.

 

3) The sums invested in a PERIN can then be invested according to 3 risk profiles: prudent, balanced or dynamic, the general idea being that the investor has every interest in taking more risks in the accumulation phase of his PERIN , his time horizon being very long at that time, before gradually securing his investments as soon as the age of his retirement approaches.

 

4) At the time of his retirement or once he has reached the legal retirement age, the saver will be able, and this is the other great novelty that comes along with PERIN, to choose to release all or part of the sums paid into his PERIN, in the form of capital and no longer only in the form of an annuity as it was the case with previous retirement savings schemes. These released sums will then be reintegrated into the income tax of the saver for the part corresponding to payments giving rise to the right to a tax reduction on entry, while capital gains will be taxed at the PFU of 30 %. The tax gain could be significant since, logically, the marginal tax rate of the saver will be lower once he retires, and he can also choose to spread his withdrawals over time to optimise his taxation over the years.

 

We again insist that this presentation is intentionally simplified to focus on the most important elements to remember, and we are at your disposal to discuss with you your situation in detail and find the solution that can best correspond to your situation and your needs. PERIN is a powerful asset management tool but it requires an approach that takes into account many parameters such as the marginal tax rate of the subscriber, the specific ceilings for self-employed workers or even the possibility to use the ceilings of up to the last three previous years that were not yet used, and it must be reconsidered every year according to the evolution of the personal situation of the subscriber. We are committed to being by your side throughout the various stages of your life to ensure that your PERIN provides you with the best possible benefits at all times.