Tick tock… Attention, last days before the definitive disappearance of PERP!

The september 15, 2020

On October 1, 2020, the PERP, the French Popular Retirement Savings Plan, will definitely give way to the PER, the French Retirement Savings Plan. But what significant differences exist between these two media?

Like PERP, PER is a long-term savings solution in which the capital and interest generated are blocked until retirement and can only be used in advance in well-defined cases. The subscriber, whether it is a PERP or a PER, benefits from a tax advantage when making payments into his savings plan.

One of the advantages of PER is the possibility of being able to release funds in the event of the acquisition of one's main residence, which is not always possible with PERP. The second advantage of PER also lies in the possibility of total capital outflow unlike PERP where total capital outflow is only possible if the amount of the annuity is less than € 40.

But regarding taxation, whether the exit is in the form of capital or annuities, the PER is a less advantageous medium than the PERP, which can even go as far as the loss of the benefit of the tax exemption.

PERP taxation:

• in the event of a capital exit, two possibilities can be considered: either the sums paid are taxed at the income tax scale and in this case the paid-up capital is re-taxed, or it is possible to opt for the flat-rate deduction 7.5% of the capital amount (after 10% reduction) + 9.1% social security contributions, i.e. a maximum total tax of 15.85% (generally more advantageous!).
• in the event of an exit in the form of annuities: the annuities received are taxed at the income tax scale after deduction of 10% + social security contributions based on income of 0%, 4.3% or 9.1%.

PER taxation:

• in the event of a capital outflow: the sums paid are also taxed at the income tax scale therefore the paid-up capital is re-taxed. In addition, the interest generated is taxed at the one-time rate of 30%. This taxation is also applied in the event of an early exit to acquire his main residence.
• in the event of exit in the form of annuities: The annuities received are taxed at the income tax scale after deduction of 10% + 17.2% of social security contributions on a fraction only (depending on age).

Another disadvantage of PER is its taxation, which depends on the age of the subscriber at the time of his death. Indeed, the PERP or the PER are related to life insurance contracts. In the context of life insurance, the tax is more advantageous for payments made by the subscriber before age 70:

• Relief of 152,500 € per beneficiary couple.
• 20% tax deductions up to € 700,000.
• Above 700,000 €, tax deductions of 31.5%.

For payments made after 70 years:

• The reduction applied will be € 30,500 for all contracts taken out for the same beneficiary.
• Depending on the family relationship, the beneficiary will be taxed with free transfer rights.

For the PERP, these same rules are applied which is not the case for the PER. Indeed for the latter, it is not the age of the subscriber at the time of the payments that is taken into account to determine the tax applied but his age on the day of his death. Thus, if he dies after his 70th birthday, even if the payments were made before that age, the sums will be taxed with inheritance tax and the allowance will be only € 30,500.

Thus, in addition to the advantage of being able to exit the PER in the event of the purchase of its principal residence and in capital, the PER is a less advantageous medium than the PERP, especially in terms of taxation.

To conclude, if you have not yet opened your PERP, don't hesitate any longer while there is still time! Our Wealth A7 experts are at your disposal to support you: your consultation request

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Article by : Eloïse LAUTIER

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