CMS Expert Guide to Pensions in France

France has a three‑pillar system. The first pillar is a mandatory basic pension scheme administered by the state. The second pillar is a mandatory supplementary pension scheme. The third pillar is a voluntary private pension scheme that the employer may subscribe to for its employees. In addition, individuals may subscribe to private retirement savings schemes (as a kind of fourth pillar).

There are both defined contribution and defined benefit schemes, also known as the Article 39 regime. Defined benefit schemes are divided into two categories: (a) additive pension schemes, where the amount of the benefit does not depend on the level of benefits paid by other pension schemes; and (b) differential pension schemes, where the amount of the supplementary pension tops up the benefits paid by other pension schemes to a guaranteed level. In addition, employees can voluntarily subscribe to a private retirement savings scheme.

The Pacte Act (No. 2019-486, 22 May 2019, JO 23 May) authorised the Government to take the necessary measures by ordinance to modernise the legal framework for defined benefit pension schemes in order to adapt and harmonise their social security and tax regimes.

Ordinance 2019-697 of 3 July 2019 introduced a new Article 39 regime. As a result, from 4 July 2019 (date of publication of the order), no new member may be affiliated to a former Article 39 scheme existing on that date.

In addition, no new conditional additional right to benefits may be acquired within a scheme in respect of periods of employment after 1 January 2020, except for beneficiaries who joined such a scheme before 20 May 2014, which had been closed to new affiliations since at least that date.

On the other hand, the new Article 39 scheme provides that if a beneficiary leaves the company, their pension rights will remain vested if they meet the conditions set out in the scheme.

Private pension provision is not mandatory. All employees must be enrolled in the basic and supplementary pension schemes.

All employers must be affiliated to the first- and second-pillar schemes and can choose to introduce a third-pillar pension scheme operated by an insurance company.

The Pacte Act has created new retirement savings vehicles (pension savings plans) without abolishing the old schemes (such as the article 83 supplementary pension schemes, Madelin contracts for the acquisition and enjoyment of personal lifetime rights, Perp and similar schemes). These schemes may no longer be marketed from 1 October 2020, but those already in place on that date may be maintained and continue to be funded by new contributions for an unlimited period.

The basic pension scheme is administered by the state. Second-pillar schemes are administered by bodies managed by trade unions at a national level. Third-pillar schemes must be managed by an insurance company authorised to do so by the French authorities.

There is no minimum level of contributions for either employers or employees in private pension schemes, but there are caps that apply in the assessment of social and tax-favourable regimes. There are mandatory contributions in both the basic and mandatory supplementary pension schemes (first and second pillars).

In defined benefit schemes, the employer must deposit sufficient funds into an account of the pension fund company to ensure that retiring employees receive their full pension when an insurance company is involved. An ordinance of 9 July 2015 provides that pension benefits liquidated under direct pension commitments undertaken by the employer (without an insurance company) are secured at least 50% by 2030. The secured proportion of commitments is increasing according to the following schedule:

• As from the closing of the accounts immediately after 1 January 2017, at least 10% of the commitments undertaken for the closed financial year;
• From the closing of the accounts immediately after 1 January 2020, at least 20% of the commitments undertaken for the closed financial year;
• As from the closing of the accounts immediately after 1 January 2025, at least 40% of the commitments undertaken for the closed financial year;
• As from the closing of the accounts immediately after 1 January 2030, at least 50% of the commitments undertaken for the closed financial year.

In 2025, the commitments increased from 20% to 40%, the next step being the 2030 threshold of 50%. If a company fails to secure the mandatory funds, it is subject to a penalty of 30% of the unsecured amount.

7. What age are benefits taken?

Benefits from both the basic and the mandatory supplementary pension schemes can normally be taken between 62 and 64, depending on the member’s year of birth. There is no minimum age for taking benefits from non-compulsory schemes. However, to retain the favourable social and tax regime for the employee:

1. in a defined contribution scheme, benefits must not be taken before the earlier of payment of benefits from the mandatory pension schemes (basic or supplementary) or between 62 and 64, depending on the birth year; and
2. in the case of a defined benefit scheme, the employee must end their career with the scheme employer before taking benefits.

Defined benefit schemes are financed exclusively by the employer. Private defined contribution schemes can be financed by the employer, or by both the employer and the employee, depending on the internal documentation setting up the scheme in the firm.

Yes. Some private defined benefit schemes must be registered with the Social Administration to benefit from the favourable social regime. In addition, the sums paid by companies must be declared, employee by employee, to be deducted, and the company must also communicate this information to each employee concerned.

In principle, sums paid by an employer for retirement are deductible from its corporate income tax. These sums are exempt from social security contributions under certain conditions and limits. They are also exempt from CSG and CRDS (9.70%), except where they are paid into a pension savings plan (PER). The forfait social (a social security flat rate), limited to 20% or 16%, may also be payable on payments into certain company retirement savings plans.

As far as beneficiaries are concerned, the sums paid by the company and by the employee are deductible from their taxable salary, up to an overall ceiling that is the same as for other payments made with a view to retirement (for certain payments, the employee may waive the deduction in exchange for an exemption for annuities paid out on retirement in return for these specific payments).

However, defined‑benefit pension schemes are governed by specific rules.

Sums paid by the employer to finance a defined‑benefit pension scheme with certain rights are, under certain conditions, exempt from social security contributions, CSG, CRDS and forfait social, but are subject to a specific 29.7% contribution payable by the employer.

Sums paid by the employer to finance a defined‑benefit pension scheme with random rights are, under certain conditions, exempt from social security contributions, CSG, CRDS and social security charges, but are subject to a specific contribution, the rate and basis of which are chosen under an irrevocable option (except in special situations) by the employer. This contribution is:

• either based on annuities at a rate of 32% for annuities settled since 1 January 2013 (16% for those settled before that date but after 1 January 2001); or
• based on premiums paid to an insurer to finance these commitments, at a rate of 24%. For plans set up before 2012 that can be managed internally, the rate is 48% on the basis of allocations to provisions or the cost of services rendered during the year.

In addition, if the scheme does not satisfy certain conditions, employer and employee contributions will be subject to standard social contributions, will not be tax‑deductible, and employer contributions will be treated as taxable income for the employee.

No social contribution is payable on investment returns. For resident pension funds (non-profit organisations), corporate tax is due at 15% on dividends and 10% on interest.

No tax is due on capital gains. For non-resident pension funds, withholding tax is due on dividends at a rate of 30%, subject to limitations in relevant tax treaties. EU pension funds, or those established in Norway, Iceland or Liechtenstein, can apply for a withholding tax rate of 15% on French dividends, provided they qualify as non-profit organisations under French law. No withholding tax is due on interest or capital gains for EU pension funds or those established in Norway, Iceland or Liechtenstein.

12. Are benefits taxed?

Supplementary retirement pensions are subject to health insurance contributions, CSG and CRDS at the respective rates of 8.30% and 0.50% (with reduced CSG rates for small pensions), while those paid under defined‑benefit plans are also subject to a specific contribution at the rates of 7% and 14%, applied to brackets revalued each year.

The portion of benefits paid out under a PER that corresponds to voluntary contributions not subject to an entry tax option is exempt from CSG and CRDS on earned or replacement income, as well as from health insurance contributions on retirement benefits.

The portion of these benefits corresponding to other PER payments is subject to these deductions.

In defined‑benefit schemes with random rights, if the employer chooses to pay the levy on the benefits rather than on contributions, a 32% contribution is due on pensions in payment (for pensions taken after 1 January 2013).

Pensions are liable to income tax, subject (with certain exceptions) to a 10% allowance (capped at EUR 4,399 per tax household for 2024 income tax purposes).

No (nor for employees). 

There is no limit on benefits or contributions, but the availability of favourable social and tax treatment is capped.

Insurance companies are supervised by an administrative authority called ACPR, which ensures they are able to fulfil their commitments.

ACPR receives information from insurance companies as it authorises them to carry out their activities and monitors their solvency. The social and tax authorities can audit employers at any time.

Defined contribution schemes and most defined‑benefit schemes are insured by an insurance company in the event of insolvency. In addition, specific insurance exists to partially guarantee debts to employees in insolvency procedures.

French law prohibits many kinds of discrimination, including discrimination on grounds of gender, age, pregnancy, political opinions, union activities, physical appearance and disability. In defined contribution schemes, employer contributions are not exempt from social contributions if the scheme excludes employees on grounds of age or seniority.

Benefits from both the basic and mandatory supplementary pension schemes can be taken before the legal retirement age in limited cases (e.g. short careers and disability). For third‑pillar schemes, benefits cannot be paid before the employee retires.

In the case of a defined‑benefit scheme, an employee who left the company before retiring lost any entitlement to the benefits they had accrued (subject to exceptions).

However, this condition of presence in the company at the time of retirement appeared contrary to a European directive of 16 April 2014 — known as ‘pension portability’. This directive required EU Member States to prohibit any loss of supplementary pension rights in the event of leaving the company before retirement.

To comply with this directive, Ordinance No. 2019‑697 of 3 July 2019 relating to professional supplementary pension schemes, issued on the basis of the Pacte Act, created a new system under which the requirement to be employed by the company at the time of retirement no longer applies. This means that employees no longer need to be working for the company when they retire in order to receive their supplementary pension.

In the case of a defined contribution scheme, employees’ accrued rights are frozen until retirement.

Union involvement depends on the kind of insurance company. If an employer sets up a supplementary pension scheme with a mutual insurance company, the employees become members of that company. There is no specific employee involvement in other types of insured arrangement.

No.

Insurance companies operating retirement plans established in other EU Member States can operate such plans in France.

If a pension scheme has been introduced unilaterally by the employer, the employer can terminate it by giving notice to the employees. If the pension scheme has been introduced by a referendum, the employer must hold a new referendum to terminate the pension scheme. If the pension scheme has been introduced by a collective bargaining agreement, the employer may terminate it but must negotiate a renewal with the union’s representatives. The employer is sometimes compelled to keep a scheme, or at least to guarantee accrued benefits at termination (e.g. if required by a national collective bargaining agreement).