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Pension Provisions for Expats in France
Moving abroad involves lots of financial planning: in the short term, you have to figure out your relocation costs. In the long run, pension planning is even more important. This Relocation Guide offers an overview of France’s social security system and how you may — or may not — benefit from it.
In addition to the two mandatory pillars of the pension system, which are described in detail on the previous page, the French government also supports two kinds of voluntary retirement plans.
PERCO and PERP: Tax Benefits for Your Retirement Plans
PERCO: Collective Saving Plans for Corporate Employees
Plenty of companies in France offer a collective savings plan to their staff, which complements the mandatory national and occupational pension schemes. However, this form of collective retirement planning is purely voluntary, though your employer might sign you up automatically unless you insist on opting out.
The PERCO (plan d’épargne pour la retraite collectif — “collective saving scheme for retirement provisions”) offers employees the opportunity to contribute money from a share in the company profits, from a flexi-time account (instead of overtime premiums) or simply up to 25% of their gross earnings per year. The company often supports employees who decide to join PERCO financially too.
An employer can mostly support the owner of each PERCO scheme with up to 16% of the so-called PASS limit (plafond de la Sécurité sociale). The latter gets adjusted on a yearly basis: in 2017, it was raised to 3,269 EUR a month or 39,228 EUR a year. This means that employers can currently pay up to 6,276.48 EUR per year into a staff member’s individual PERCO account. This money doesn’t then count as income for tax purposes in an annual tax return.
However, a PERCO scheme is not just a regular savings scheme. As the money is earmarked for retirement, the funds can only be accessed earlier in exceptional circumstances, for example in the case of disability, death, or long-term unemployment. It can also be used to clear debts if private bankruptcy threatens or to buy your own first house if you are planning to live there.
Usually, however, the money from a PERCO will be paid out as an annuity or a lump-sum payment upon retirement. The exact conditions depend on each individual savings plan.
If the employee decides to switch jobs and starts working for a new company in France, it is normally possible to transfer the funds from one PERCO account to another. Again, how this works in detail will vary from case to case.
Individual Pension Planning with the PERP
Apart from the collective PERCO for employees, there is also the PERP (plan d’epargne retraite populaire) for all residents, regardless of employment status. A PERP is an individual pension plan which can be obtained at French banks, insurance companies, and pension funds. How much you contribute is up to the specific product you buy.
Just like a PERCO, the funds saved and invested in a PERP are not supposed to be accessed before retirement. There are certain exceptions for dire emergencies here, too, especially death, disability, debts, or long-term unemployment. Moreover, a PERP can also be used to save up for buying your first house. Normally, though, at least 80% of the funds will paid out as an annuity upon retirement. Up to 20% can also be withdrawn as a lump sum when you retire.
Participating in a PERP can also have certain advantages for doing your taxes in France. Up to 3,804 EUR in yearly PERP contributions (2017 figure) can be deducted from your taxable income in your annual tax return.
Of course, all other kinds of investment strategies and private pension plans are also available at French banks, although they may not receive similar tax benefits to the PERCO and PERP schemes.
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Retirement Planning for Expats in France
All the above information on retirement provisions and retirement planning in France mostly applies to French nationals and long-term residents who will still be living in France when they retire. If you only plan on living and working in France for a few years, your situation will be different.
As both the national pension plan (retraite de base) and the complementary occupational scheme (retraite complémentaire) are mandatory for employees, there is usually no way around paying contributions (details on some exceptions below).
Moreover, you will not get back any of your contributions when you leave France. As mentioned above, the French pension system is based on pay-as-you-go financing — today’s employees pay for today’s retirees. Their social security contributions to the retraite de base and retraite complémentaire are not saved or invested for them in some individual account, but used to finance the retirement benefits of current pensioners in France.
Exceptions for Assignees Covered by Social Security Agreements
However, nationals of all EU/EEA member states, as well as expats from all countries that have a bilateral social security agreement with France, may benefit from certain privileges. If they are sent to France on a corporate assignment while still being employed by a foreign company, they are usually exempt from paying social security contributions in France.
Within the EU/EEA, an assignment is normally defined as lasting for up to 24 months. However, if yours is supposed to last longer, you may still be able to apply for that exemption. For the duration of your assignment, you will remain part of the national pension system in your home country and pay your social security contributions there.
Most social security agreements with France contain similar provisions, but the details may vary according to each individual agreement. So, if you are an assignee from one of these states, don’t forget to look it up!
Harmonizing Pension Schemes: How to Benefit from France’s National Pension Plan
What if you are not a foreign assignee, but have found a job in France on your own? If you come from an EU/EEA member state and will be working in France for more than one year, you are entitled to a French pension (retraite de base) once you reach the official (French) retirement age.
EU/EEA nationals will get a national pension from each EU/EEA member state where they have worked for at least a year. They only have to apply at only one social security office, though — either in the country where they live when they retire or the state where they have last worked. They will contact the authorities in other countries and figure out the amount you are due.
There are two ways of calculating the state pension you are entitled to from several EU/EEA countries, the so-called “separate pension” method and the “totaling prorate” method. Depending on your employment history (e.g. your salary and the number of years spent working in each country), as well the various formulas used for calculating the national pension across the EU, the final amount you receive in benefits can differ between the two methods. However, that’s no reason to worry!
When you apply for your retirement benefits within the EU, your state pension will always be calculated in both ways; you will then receive the higher amount. This way, temporarily working in another EU/EEA member state won’t negatively affect your retirement planning.
Social security agreements usually work in a similar way; they are supposed to harmonize the national pension schemes of two different countries. Therefore, they don’t just aim to avoid dual coverage (paying social security contributions in both countries), they will also calculate your unified national pension upon retirement according to one of the two methods described above.
Essential Advice for All Expats — Especially for Those from outside the EU
Expats who are neither from an EU/EEA member state nor from a country that has signed a social security agreement with France should remember: if you have worked in France long enough (usually more than ten years) and if you retire in France, you are entitled to a French pension for that period. Otherwise, especially if you decide to retire outside of France, their contributions will be lost.
Before moving, every expat, regardless of where they come from, should talk to their social security office and a financial advisor about their retirement planning to see what will happen to any existing pension schemes while they are abroad. However, this is even more important for expats that don’t benefit from social security agreements or EU legislation, as they will have to cover the financial gap completely on their own.
All about France
With its rich culture and history, France is the ideal destination for many expats. But before making the big move, there are many steps to move to France that should be considered. This practical guide takes you through the requirements for moving to France so that you are well prepared for your adventure abroad.Read Guide
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