Taxation of pensions, how is a retirement pension taxed?

Retirement pensions are entitled to a special tax regime. Those who decide to contribute to retirement in order to enjoy a supplementary pension, by subscribing to PERP, FCIP are entitled to lower taxes compared to working income. Contributing to retirement allows you to save and pay the same income tax as you would on earned income. The difference is that the retirement pension benefits from a lower generalised social contribution (CSG) and very little social security contributions.

Pension fund system: income tax

To calculate the taxation of retirement pensions, it should be noted that pensioners pay income tax at a rate similar to that of labour income. The tax calculation applied is 10%. This means that the total pensions are reduced by 10% before the tax calculation is assessed. The difference is that the maximum ceiling that the allowance can reach is lower than that of labour income. In 2017, the ceiling was €3552 instead of €12,305 applied to the entire tax household. The allowance may also not be less than €383 per person (allowance valid in 2017).

Social security contributions imposed by a retirement pension

Several social security contributions apply to the retirement pension. The general social contribution of retirement pensions is 8.30%. Of this percentage, 5.90% is deducted from the total pensions that are subject to income tax. Retirement pensions are concerned by the payment of the Contribution to the Repayment of the Social Debt at the standard rate of 0.5%. The basis for this social levy is the gross amount of all personalised or reversionary pensions. As from 1 April 2013, pensioners will pay 0.3% of their pension under the Casa (Additional Solidarity Contribution for Autonomy).

SCIP principle and PERP

SCPIs represent a smart alternative for active or retired individuals to supplement income through capitalization. The average monthly amount of a basic pension for a full career is €1,037. To this price, it will be necessary to add the pensions paid to the Arrco and Agirc supplementary schemes. The Popular Retirement Savings Plan (PERP) is an individual and optional insurance contract. With this solution, the subscriber will be able to contribute for retirement. After making payments on his plan until retirement, he receives an accumulated capital converted into an annuity. The pensions will be paid to him until his death.
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