Three years after its launch, the Individual Retirement Savings Plan seems to find its audience. Be careful though: attractive on paper, the PER is also a complex and engaging product. Here are three potential pitfalls to keep in mind before signing.
1 – Watch out for fees!
From 0% to 5% on installments; from 0.60% to 2% in management fees on euro funds and up to 1% on unit-linked… The fees charged are the first point of vigilance before opening a retirement savings plan (PER) . Trying to assess whether the level of fees is consistent and justified in relation to the product offered is not easy. The average payment fee for the PER is estimated at 3.18%, according to a report issued in July 2021 by the Financial Sector Advisory Committee. But they can reach 5%. Whether for retirement savings or life insurance, these costs have a significant impact on the profitability of the contract. In addition to payment and management fees, some media also provide for performance or arbitration fees. But that’s not all.
Of the fees on payments over 2% or 3% seem excessive to me. Regarding transfer fees, I consider that the limitation of fees to 1% of the savings transferred during the first 5 years, then 0% after, implemented by the Pacte law, is a completely satisfactory measure, confides Gilles Belloir, Director of Placement-direct.fr. However, there is still make transfers between companies more fluid. The difficulties currently encountered by savers who wish to transfer their retirement savings constitute non-tariff barriers that must be removed.
PER: tips from bankers and insurers to slow down your transfers
The saver has the possibility and even every interest to compare the costs before subscribing to a PER. Since June 1, details of these costs have been available on insurers’ websites.
Bank charges : up €259 savings thanks to our comparator
2 – Taxation: or not to deduct the payments?
This is a novelty of the individual PER compared to its predecessors, the Perp and Madelin: tax deductibility, that is to say the possibility of deducting the amounts paid from taxable incomeis no longer a rule, but an option, even if it is activated by default.
You can thus choose to give up this tax carrot and to benefit instead from a softened tax on exit. Attention! This choice must be indicated to the PER manager when the contract is opened. It will then automatically apply all installments. Until a possible counter-order, but which will only concern the payments made afterwards.
It changes a lot of things. On paper, the possibility of waiving the deductibility indeed leaves the PER from the single register of tax exemption product. This broadens the target by opening the product of the little imposs saverswho can build up a low-taxed life annuity when they leave, when they retire.
In reality, however, does giving up deductibility really make sense? For savers who do not wish to obtain a tax reduction, most of the time, life insurance will be preferred, said Gilles Belloir, CEO of Placement-direct.fr.
Advantage of these products on the PER, in particular: the possibility of recovering its investment before retirement.
Retirement savings: how much can you deduct from your taxable income?
3 – Your money blocked until retirement
This was already a characteristic of Perp and Madelin, it was not called into question by the PER: once the money was placed, it is not possible to recover it before retirementexcept in a few specific cases: the death of the spouse, disability, over-indebtedness, expiry of unemployment rights, cessation of activity following a judicial liquidation… The PER adds one more: the acquisition of the main residence .
Result: The product continues to appeal primarily to people who can afford to block their savings for 15 years or more, said Gilles Belloir, CEO of Placement-direct.fr. For others, it is better to favor more liquid supports, such as life insurance.
It’s this illiquidity which confines the PER to the role of a complementary product. Insofar as the funds are blocked, the PER cannot be the only savings tool; the saver must take care to keep capital available (short term and also medium term in the event that it is not close to retirement), says Gilles Belloir.
Compare the offers of PER reduced fees