Saving for retirement to be encouraged by French Government

As part of the draft “PACTE” law, which is due to be presented to the Council of Ministers in early June 2018, the Government will re-open the question of retirement savings. The idea is simple: to create a single device that would absorb (but not remove) the various individual and collective retirement savings products already on the market, for example, the “Perp”, the “Madelin” and the “Perco”. A saver would be able to change status (e.g. that of employee or contractor) or change business once or many times, in the knowledge that this pension “envelope” could be retained throughout his or her career.

Note: Savers with existing retirement products would be able to transfer them to this new single product. A transfer fee of 3% would be payable unless the retirement product being transferred was more than 5 years old.

The new concept consists of three elements:

1. Employee savings from profit-sharing and incentive schemes;
2. Voluntary payments made by the saver;
3. Compulsory payments made by the company.

Another new concept under the draft PACTE law is the ability to withdraw one’s savings in the form of capital on retirement. Currently, the only possibility is, in principle, to take a lifetime annuity. Note, however, that the capital withdrawal would only apply to the saver’s voluntary payments and the sums from profit-sharing and incentive schemes.

Finally, to promote the new system and encourage the French to save, all voluntary payments made by the saver would be deductible from his or her income tax base. However, those same sums would be taxable when withdrawn in capital.