In a context where working life and preparation for retirement are closely linked, it is essential to understand the mechanisms of the company pension scheme. This is a savings solution that enables employees to build up savings with a view to retirement, while benefiting from tax and social security advantages. In this article, we’ll look at the main features of the company pension scheme, as well as the different plans set up within this framework.
The basics of company pension schemes
First of all, it should be noted that there are two main types of company pension scheme: pension savings plans (PER) and group supplementary pension contracts. While these two solutions have their own specific features, they nevertheless share certain similarities in terms of purpose and benefits granted.
Indeed, the aim of these schemes is to enable employees to build up capital for their retirement from their own savings, often supplemented by employer contributions. This system, based on collaboration within the company, encourages employees to save for their retirement, while benefiting from advantageous schemes.
Retirement savings plans (PER)
Since 2019, retirement savings plans (PER) have replaced previous schemes. The PER is now the main tool enabling employees to save for their retirement within a favorable tax and social framework. There are different types of PER:
- The individual retirement savings plan: open to all individuals, whatever their professional status, this plan can be taken out with an insurer, a bank or an asset manager.
- Group retirement savings plan: set up by a company for the benefit of all or a specific category of its employees, this plan generally involves a financial contribution from the employer towards employee contributions.
- Compulsory retirement savings plan (PERO): imposed by the collective agreement or company agreement, this plan concerns companies in the non-agricultural private sector. As with the group PER, the employer often contributes to financing the PERO.
Within these different PER plans, the sums paid in are invested in financial funds, whose value fluctuates with the markets. Patience and a long-term vision are therefore essential if you hope to see your savings grow.
Group supplementary pension plans
In addition to PER plans, some companies offer their employees the option of subscribing to a group supplementary pension plan. This solution involves employees and/or employers making contributions to acquire supplementary pension rights, which are then added to the basic and supplementary pensions provided by the general scheme.
Tax advantages of company pension schemes
One of the main advantages of the various company pension schemes is their tax benefits. Among the advantages available to employees who subscribe to a PER or a group supplementary pension contract are the following:
- Deductibility of payments: contributions paid by employees to a PER or a collective supplementary pension contract can be deducted from their taxable income, up to a certain ceiling.
- Social security exemptions on employer contributions: when the employer participates in a PER or a collective supplementary pension contract, his contribution is exempt from social security contributions in certain cases.
- Non-taxation of gains as savings grow: as long as the sums invested in a PER or a collective supplementary pension contract have not been withdrawn, their gains are tax-exempt.
These tax and social benefits help to make company pension schemes more attractive to all stakeholders.
Leaving the company pension scheme
Finally, it's important to address the issue of leaving the company pension scheme. Depending on the type of plan subscribed to and the employee’s particular situation, several options may be considered:
- Lump-sum payment: At the time of retirement, employees may decide to receive all or part of their savings in the form of a lump sum. In this case, tax treatment depends on the choice made and the length of time the contract has been in force.
- Life annuity: The employee chooses to receive a regular annuity calculated according to his or her age at the time of conversion, the length of the contribution period and the amount of accumulated savings. This option guarantees an annuity for life, but may limit the amount received compared with a lump-sum payment.
In short, the company pension is an attractive savings solution for employees who wish to build up a supplementary income when they stop working. Thanks to its many tax and social security benefits, it meets employees’ needs for long-term financial security. However, it is important to carefully study the features of each plan to make an informed choice.
