PER: how to optimize your investment in a retirement savings plan?

Open forum

Reading time:

3 min

More and more French people are becoming aware of the importance of financially preparing for their retirement to maintain their standard of living. The product that meets this need is the PER (retirement savings plan). But how can you succeed in capitalizing effectively? Advice from Stellane Cohen, president of Altaprofits.

The aging of the population and the increase in life expectancy present a major challenge to maintain the economic balance of the pay-as-you-go pension system in France. The situation is clear for future retirees: their pension will inevitably decrease compared to their final salary. To compensate for this, there is a savings product that is ideal: the pretirement savings plancalled PER. Already more than 10 million French people* are equipped with it (as of December 31, 2023), for 31 million active people in France. Among them, approximately 3.5 million are individual PERs. This figure demonstrates the rise of this system, originally created precisely to supplement the basic and supplementary schemes of traditional pensions. But how to use it properly?

>> Our service – Compare the performance of retirement savings plans (PER) using our simulator

A long-term vision for investing

We know that the French are mostly risk averse, often due to a lack of knowledge. However, financial markets allow you to increase your capital when you invest gradually, over the long term and by diversifying. Thus, the PER meets these three requirements well: it offers a long-term project (increasing your retirement pension), allows for progressive payments and offers many investment vehicles.

Using your PER well therefore means taking advantage of this long-term horizon and the diversity of the media offered: shares, mutual funds and ETFbonds, real estate investments, structured products, Private Equity… Over several years of investment, you can afford to take more risk if you diversify your investments. That’s the whole advantage of the PER!

Horizon management to enhance your PER

The PER also has the particularity of offering a horizon management. This management consists of optimizing the potential return at the beginning of the contract, by exposing savings more to the financial markets, then gradually securing towards low-volatility monetary funds or euro funds with guaranteed capital, as retirement approaches. With this management, it is possible to take more risk on the stock market in the early years; a market that offers potential returns, with greater volatility. This type of management therefore makes it possible to reduce the uncertainties associated with market fluctuations and to ensure that you reach your capital objective on the day of retirement, even if the markets are down at that time.

There are several horizon management profiles. Before choosing from those available, it is essential to define your risk profile, so that your investment strategy is adapted to your risk tolerance. Be careful, horizon management does not prevent a periodic review of the portfolio, to ensure that market conditions remain aligned with your objectives and personal needs.

Properly feed your PER and optimize performance

To optimize its performance, we can implement another strategy: progressive investment. This consists of making scheduled free payments on their contract, generally accessible from 50 euros per month. Investing regularly in the stock market helps smooth out market fluctuations, by mitigating the impacts of increases and decreases, which can contribute to a more stable overall performance of the PER over a long period. In addition, this approach has the advantage of investing your money regularly and painlessly over time, by adapting to each person’s savings capacity, rather than putting in a large sum at once, which can be complicated. In addition, it offers great flexibility: it is possible to adjust the amounts invested at any time, by increasing, decreasing or even suspending payments according to your needs.

You should also not forget to compare management fees, which can have a significant impact on performance, and exit options before making your choice.

And the tax advantage?

In addition to all this, the PER also offers a tax advantage. Even if it should not be the only reason for investment, it is possible to opt for the deductibility of the premiums paid on your PER from your taxable income, up to a limit of one annual ceiling : the most advantageous between 10% of the PASS (the annual ceiling of Social Security) of the previous year (4,399 euros for 2024) or 10% of their professional income capped at 8 PASS. This tax reduction can represent a significant saving, especially for taxpayers in the highest tax brackets. Knowing that if the tax advantage is used at the start, the amounts withdrawn will be taxed at the end, the PER is particularly interesting for people who will change marginal tax bracket once retired, due to their drop in income.

But be careful, it would be reductive to only see the PER taxation: this envelope remains above all an excellent way to capitalize over the long term.

*Source: General Directorate of the Treasury – figures published on April 29, 2024