the costs that must be successfully compared

6.2 million French now have a retirement savings plan (PER). The PER is a real hit, accounting for almost €70 billion in net inflows. A success that is sometimes overshadowed by expensive banks and insurance companies…

Bruno Le Maire made the Pension Plan (PER) one of the pillars of the Pacte law. A product available since October 1, 2019, and whose success he regularly highlights. 6.2 million people are now equipped with a PER, the total outstanding amount of which is 70 billion euros, according to the latest figures published by Bercy.

As Economy Minister Bruno Le Maire, initiator of the Pacte law that introduced this innovation, reminds us, PER is simpler than previous pension products such as Perp or Madelin. And thanks to the fact that the payments can be deducted from taxable income, she benefits from very significant tax advantages. On the other hand, a few months ago, Bruno Le Maire was very critical of the excessive fees charged by banks and insurance companies.

In order to promote competition and thus the readability of the PER tariffs for private individuals, an overview of costs that can be called up online from this federal state was created. An incentive to compare contracts before subscribing or even negotiate fees. An important point, especially when we see the huge gap, which is sometimes abysmal in certain areas, according to a Spring 2021 study by the Financial Sector Advisory Committee (CCSF).

The wide range of PER costs
minimum Maximum
Fees upon Payment 0% 5% on each payment
Membership fees (at opening) 0 30
Fund management fees in euros 0.60% per year 2% per year
Management Fees for Supports in UA 0.50% per year 1% per year
arbitration fees 0% 5% of the arbitrator’s fee
Management mode change 0% 1%
Pension Arrears Fees 0% 3%
fee 0% 1% of the amounts transferred

Source: CCSF. Panel of 34 individual insurance PERs.

Please note: The cost analysis only relates to individual PERs that you open yourself with your bank, your insurer, an asset manager or a web broker. A situation that affects today the 3.5 million people who have opened an individual PER out of the 6.2 million existing PERs. Collective PER are difficult to compare as companies bear most of the costs. The rates listed here will be charged to all savers.

The large discrepancies mentioned above are apparently explained by the diversity of entities selling PERs: the study conducted by Smaphore Conseil for the CCSF covers both the big banks and a selection of PERs from online brokers, traditional insurers or wealth management networks.

Average cost of individual PERs
fee type Mean
Fees upon Payment 3.18%
Fund management fees in euros 0.87%
Support administration fees in UA 0.85%
arbitration fees 0.72%

Source: CCSF.
Averages calculated based on the panel of 34 individual insurance PERs.

Payment fees: Watch out for the 5%!

The average of these costs for the PER is Estimates 3.18% but they can reach 5% on certain contracts, the legal maximum! These numbers are from 2021, but no significant change in PER costs was observed at that time. As with the prices of life insurance, the differences between banks, insurers, associations or web brokers are colossal when it comes to payment costs. The sum of the free 頻 puts the assets of online brokers, banks and mutual insurance companies at the average level worldwide, and it is wealth management consultants, traditional insurers and associations that come closest to the legal maximum … fees for payments in excess of 2% or 3% seems excessive to me, estimates Gilles Belloir, Director of Placement-direct.fr.

But beware! As the CCSF stated in last year’s report, the rates shown here are approximate only the maximum amounts stated in the contracts. Gold: These can be negotiated by the customer or by the distributor (CGP, broker) for his customers. They may also be the subject of promotions to encourage savers to sign up for a contract or pay back. The CGP representatives would like to specify that in practice the registration fees are much lower than those presented. It’s up to you, customers, to make sure you’re not being charged the maximum!

Should you choose life insurance or PER to prepare for your retirement?

Management fees: compare

This time with rare exceptions: no negotiation possible. Neither for the management fees in relation to the fund in euros, the secure support, nor in relation to the support in units of account (UA) these funds invest in stocks, real estate or other riskier but potentially more profitable assets.

Regarding the fund in euros, the CCSF President notes in her report that despite the significant difference shown in the table above, the spread is distorted by the 2% of the new generation fund in euros present on a contract. Apart from this exception, the fund’s management fees are relatively homogeneous in euros.

In terms of unit of account (UC) fees, it’s not the same. For example, in the big banks alone, some charge 0.60% for the administration of UCs (a withdrawal made every year on all savings in UCs), others 1%.

Retirement planning: the list of the best PERs

Nobanques: the cheapest offers to control your budget

Pilot Management and Arbitration: Attention surcharges

The CCSF points to many divergent practices in managing unit-linked accounts. Like payment fees, arbitrations (selling and buying UC) are sometimes free…sometimes heavily charged. The latter, even if they are punctual, are called upon for each arbitration carried out. They can therefore affect the return on your investments.

Most notably, the CCSF notes myriad pilot management pricing practices: sometimes an additional fee to be eligible for pilot management, sometimes fees to change one’s risk profile, etc.

Life Insurance: Is Choosing Pilot Management Really A Good Idea?

And this without forgetting that The above costs will be charged by the insurer. However, the Management company for each UC support will also incur costs, even if these are invisible to the saver. The performance you’re told is actually without that internal CPU cost. But they are not negligible… and they vary greatly from one PER to another (see table below). In addition, the management company pays part of it to the insurer and/or the distributor (bank, broker, financial adviser, etc.): this is known as retrocession. However, here too, the retrocessions prove to be extremely different…

Internal unit-linked costs for PER

Management Company Fees

minimum

Maximum

Mean

On stock UC funds

0.78%

3.29%

1.90%

including a retrocession rate of:

0.19%

1.39%

0.87%

Number of funds in RU per PER

9

1197

244

Source: CCSF.
Average fees charged by asset management companies for unit-linked funds held in panel PERs (32 individual plans).

Exit costs, on the pension: pay attention to the accumulation

Among the many tariff lines mentioned by Smaphore Conseil for the CCSF report, you should also check those related to the procedures for exiting the PER once you reach retirement age. The report thus shows that out of 30 contracts, about twenty charge for annuity arrears. Translation? With PER, when you reach retirement age, you can choose to withdraw the money as a lump sum, in one installment, or in multiple installments; or start an annuity, which is the monthly payment, until your death or a specific date. Expenses for pension arrears are expenses take each of the monthly installments the pension.

Could one also strive for 0% contracts? Yes… but beware of the other annuity fee groups, as some insurers prefer administration fees (or fees on arrears) of the annuity: an annual charge to the pension plan rather than every payment.

This accumulation of costs burdens the fulfillment of the contract. For example, the sum of management fees for insurers + management companies with shares invested in shares is already almost 3%, not counting the other fees (payment, arbitration, etc.). But for the saver who opted for payments to be deductible, the tax gain appears to erase the negative impact of costs on gross returns, pointed out Corinne Dromer, CCSF President at the time. An observation that, however, does not apply to non-taxable households, who would be enticed by the PER to forego this tax advantage…

Retirement provision: the P/E, an investment for the rich?

Leave a Reply

Your email address will not be published. Required fields are marked *