Two key pension reform measures were tabled in the Chamber of Deputies on Wednesday 15 October in Bill 8640: the working life maintenance allowance and the increase in the maximum deduction limit for provident pension contracts. The government estimates the cost of these two measures at between €29 million and €36 million a year.
The working life maintenance allowance (AMVP) is designed to encourage taxpayers to continue working until the legal retirement age (65), even if they are already entitled to an early retirement pension or already meet the conditions for a personal pension, and not to exercise their right. The carrot? An annual deduction of up to €9,000, capped at €750 per month. For a taxable income of 50,000 euros in tax class 1, the AMVP would result in a tax saving of 3,034 euros.
According to the financial statement accompanying the bill, the scheme would affect 4,000 people a year and produce tax waste estimated at between 9 and 11 million euros a year. The bill states that this amount could change "subsequently". A change that will depend on the "individual behaviour of those potentially eligible" for the scheme.
Boost for private pensions
In addition to this "activity bonus", the government wants to encourage taxpayers to take out an old-age insurance policy as soon as possible. To achieve this, the annual tax deductibility limit for payments made into a pension provision contract (the third pillar of pension insurance) as a special expense has been raised from €3,200 to €4,500. This represents an increase of 41%. The bill specifies that this increase also applies to pan-European individual retirement savings products (PEPP).
The tax waste associated with this measure is estimated at between €20 and €25 million per tax year. An amount that could also increase if many subscribers were to fall for it.
The provisions relating to increasing the contribution rate from 24% to 25.5%, gradually increasing the length of compulsory contribution periods by eight months by 2030 to qualify for early retirement; the introduction of a phased retirement option based on the arrangements in force in the civil service and making so-called supplementary periods relating to years of study more flexible will be the subject of another bill due to be tabled shortly.
