The benefits of supplementary retirement
Written by Amadou Kasse | Posted on 02/08/2024
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What is a supplementary pension?
Supplementary pension schemes enable employees to top up their basic and complementary pensions, in order to optimize their income when they stop working. This mechanism comes on top of compulsory schemes, offering an effective solution for anticipating and improving one's standard of living in retirement. Participation in a supplementary pension plan is optional. Employees have the option of subscribing to a company supplementary pension scheme, or choosing an individual solution through a banking, insurance or provident institution.
So what are the advantages for employers who decide to set up a supplementary pension scheme? How can we help you get started?
Supplementary pension: instructions for use
As its name suggests, a supplementary pension is an income supplement designed to increase an employee's compulsory pension. In fact, every working person is compulsorily affiliated to a basic pension fund (general social security scheme) and a complementary pension fund (find out about your pension fund). Supplementary pensions are optional, and are added to the income from these two pension schemes. The latter is taken out with insurance companies, provident societies or banks.
What systems can the company put in place?
Since the Pacte law (2019), we're talking about compulsory PER, formerly "article 83" on defined contributions. It can concern all employees, or just some of them. These "defined-contribution" contracts stipulate from the outset the amount of contributions to be paid by the employer. These contributions are generally calculated as a percentage of gross salary. They are placed in an account dedicated to the employee's supplementary pension. When the employee retires, he or she receives a monthly life annuity (in several instalments) or a lump-sum payment. Life annuities are subject to income tax, with a capped deduction of 10%. Employers can also set up a collective company PER (PERECO), which has replaced the PERCO since 2019. Employees can contribute their profit-sharing and incentive bonuses, as well as voluntary savings with employer contributions. Although this savings plan is optional, the plan rules defined within the company may make membership compulsory. Employees can also opt for early withdrawal before retirement. In this case, they can release their savings in the form of a lump sum, for example, to buy their principal residence.
Taking out a supplementary pension contract allows employees to :
-
Preparing their future,
an important guarantee of financial security in a context of rising inflation.
-
Benefit from an advantageous tax framework
employer contributions to the plan are exempt from income tax up to a certain threshold (5% of the annual social security ceiling).
-
Save
while reducing their tax burden by deducting voluntary payments from taxable income.
How do supplementary pensions work?
All Retirement Savings Plans (PER) are made up of 3 compartments, each representing a specific payment category:
- Individual sub-fund: reserved for voluntary payments by the investor;
- Collective sub-fund: reserved for payments from employee savings schemes such as profit-sharing, incentive bonus, matching contributions or monetization of unused vacation days;
- Compulsory sub-fund: reserved for compulsory company contributions of the "article 83" type.
PERs can be supplied by :
- The member's voluntary contributions, deductible or non-deductible,
- Time savings and employee savings schemes (transfer of old schemes or payment of unused rest days),
- Mandatory employer and employee contributions
For its part, the company benefits from a number of advantages, including tax advantages.
Benefits for the employer
What are the advantages of offering employees a supplementary retirement scheme? This system represents a major loyalty-building lever.
Why? In fact, helping your employees prepare for the future is an undeniable factor in their attractiveness and professional motivation. In fact, setting up a funded supplementary pension scheme enables companies to respond to a major concern of employees. Offering employee benefits is a real asset in a tight job market. With 2 out of 3 French people planning to change jobs (Meteojob 2023 survey), companies are finding it hard to recruit. According to the Cadremploi 2022 barometer, 52% of managers believe that recruitment difficulties are undermining their organization's business. The ability to attract and retain talent is therefore a major challenge for any employer. In this context, introducing a supplementary pension scheme is a way of enhancing the company's employer brand.
A supplementary Retirement Savings Plan also provides the company with an attractive and effective remuneration policy tool, both fiscally and socially.
The mandatory PER offers tax advantages for the company. The sums paid by the employer to an accredited insurance organization are exempt from social security contributions, subject to certain conditions. The employer also benefits from certain exemptions from social security charges and payroll taxes, but remains subject to the social security flat-rate tax at the reduced rate of 20% to 16%.
The support offered by Gerep
With over 35 years' experience in managing social protection schemes, Gerep offers companies a full range of group savings solutions, including :
- The compulsory company PER, which replaces the Article 83 contract (supplementary defined-contribution pension).
- The group company PER or PERECO (successor to the PERCO).
💡 Good to know: This employee savings product can be funded by employee savings plans.
- Supplementary defined-benefit pension plans (article 39 of the French General Tax Code). This retirement savings plan may concern all or some employees. It offers an alternative way of improving the retirement situation of senior executives, who are particularly exposed to a sharp fall in their replacement income on retirement. This retirement savings plan may concern all or some employees. It offers an alternative for improving the retirement situation of executives who are particularly exposed to a sharp fall in their replacement income at retirement.
💡 Good to know: they are financed solely by the employer. Gerep also assists you with actuarial valuations of your social liabilities. Finally, Gerep offers customized audits to help you set up your retirement and employee savings plans.
Post written by
Amadou Kasse
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