PEA: Definition and How the French Equity Savings Plan Works
The Plan d’Épargne en Actions (PEA) — the French equity savings plan — is a French tax wrapper that lets you invest in European shares while cutting the tax on your gains. In practice, a PEA is a securities account paired with a cash account: you pay money in, buy eligible securities, and the gains — capital gains and dividends — compound inside the plan free of tax as long as nothing is taken out. It is this tax-free compounding that makes the scheme so powerful over the long run.
A French tax resident may hold only one PEA per person (two for a married couple), regardless of how many institutions the plans are opened with.
Created in 1992 to steer French household savings into equities, the PEA has been regularly fine-tuned ever since: the ceiling was raised from €132,000 to €150,000 in 2014, the list of eligible securities was widened, and PEA withdrawal rules were eased in 2024. This legislative longevity — more than thirty years spanning every government — explains the trust savers and professionals place in it: the tax advantage has survived every reform and has even grown stronger with time.
The PEA is neither a product nor an investment in itself: it is a container. What a PEA earns depends entirely on what you put into it — individual shares, eligible ETFs or discretionary portfolios. To pick the right securities for this wrapper, our guide to buying shares explains how order placement and stock selection work.
How a PEA works in practice
It comes down to three stages. Deposits: you fund the cash account by bank transfer, with no legal minimum and no required schedule — it all depends on the provider. Investing: from the cash account, you buy eligible shares and ETFs; the securities are held inside the plan, and dividends and capital gains flow automatically back into the cash account or are reinvested.
Withdrawals: you can take money out at any time, but PEA withdrawal rules change radically depending on whether the plan is more or less than five years old — that is the subject of the tax section below.
One point is often misunderstood: the famous “five-year rule” runs from the date of the first deposit, not from the administrative opening of the plan. Any withdrawal before the fifth anniversary of that deposit triggers tax on the gains and, with few exceptions, closes the plan. After five years, withdrawals are no longer subject to income tax and the plan can stay open — the historic restriction on making deposits after a withdrawal was lifted in 2024.
Two management styles coexist within a PEA. With self-directed investing (gestion libre), you choose every security and place every order: the choices — and the responsibility — are yours, and costs are limited to brokerage. With discretionary management (gestion pilotée), a professional manager allocates the plan according to your risk profile, for annual fees typically ranging from a few tenths of a percent to just over one percent.
Discretionary management suits those who prefer to delegate; self-directed investing suits those who want the closest possible control over costs — both live inside the same tax wrapper.
PEA ceiling: €150,000 in deposits — and how to go beyond it the smart way
The ceiling applies to deposits, never to the value of the plan: €150,000 is the maximum you can pay into a standard PEA. If your investments double in value, the €300,000 growing inside it remains within the tax-advantaged wrapper.
Two routes exist for going further: a married couple can combine two PEAs — €300,000 in household deposits — and the PEA-PME, dedicated to small and mid-sized companies, adds its own €225,000 ceiling — with deposits across both plans capped at €225,000 per holder.
Breaching the ceiling is not a disaster: the excess deposits are treated as held outside the PEA, taxed like a securities account (compte-titres), and rectification procedures exist depending on the holder’s good faith.
Which securities can go into a PEA? The eligibility rules
Eligibility is the heart of the matter: not everything can go in. Admitted are shares in companies with their head office in the European Economic Area (or headquartered outside the EU but listed in an EU member state, under conditions), the eligible ETFs that track those markets — the bulk of the European offering — and, since certain reforms, debt securities as well.
Excluded on a direct basis: US, Japanese and post-Brexit British shares — these are bought in an ordinary securities account instead, as explained in our comparison of the PEA vs compte-titres.
ETFs tracking global indices — the S&P 500, MSCI World — raise a technical question: for a long time only European “physical replication” formats were eligible, and synthetic ETFs have fuelled recent regulatory debate. Our overview of ETFs helps you see clearly which categories can be held in a PEA and how their replication methods differ.
PEA tax benefits: the core advantage explained
On the administrative side, the account-holding institution produces an annual summary of transactions each year, and tax on withdrawals is calculated automatically by the tax authorities from the data passed on — the holder does not have to file anything specific under the standard regime.
PEA taxation boils down to two regimes, separated by the plan’s fifth year. Before five years: any withdrawal makes the gains taxable at the progressive income tax scale or, at your option, at the flat-rate levy, with 17.2% social contributions due in all cases — and the withdrawal closes the plan. After five years: withdrawals are exempt from income tax; only the 17.2% social contributions remain due on gains, collected as you withdraw.
Inside the plan, no tax arises at all: dividends and capital gains compound in complete tax freedom, which multiplies the effect of compounding compared with a securities account, where every dividend is taxed each year.
Withdrawals, closure and inheritance: the special cases
Three situations deserve a close read. A withdrawal after five years leaves the plan open and active: you keep managing the remaining securities; only the ability to add new money disappears. A voluntary closure follows the same tax treatment as the full withdrawal that triggers it.
In the event of the holder’s death, the plan is closed: crystallised gains escape tax if the plan was more than five years old, and the value enters the estate — the surviving spouse benefits from the favourable transfer rules of the marital property regime. Finally, transferring a PEA between institutions preserves its tax seniority: the five years already accrued are not reset to zero, and the receiving institution often covers part of the transfer fees.
PEA pros and cons: the honest table
| Advantages | Drawbacks |
|---|---|
| Gains exempt from income tax after 5 years | Full taxation if you withdraw before 5 years |
| Dividends compound free of tax | Direct universe limited to European markets |
| High deposit ceiling (€150,000) | Only one PEA per person |
| Works with eligible, globally diversified ETFs | Brokerage fees often higher than on a securities account |
| Can be transferred without losing tax seniority | Requires discipline: the tax break rewards staying power |
Read this table like a contract: the left-hand column pays for the right-hand one. The exemption “pays for” the discipline of the first five years; the European universe “pays for” the favourable tax treatment; the ceiling “pays for” tax-free reinvested dividends. Conversely, every drawback has its answer — the securities account for international exposure, an early first deposit for the five-year rule, fee negotiation for brokerage.
Is a PEA profitable, and what “return” can you expect?
A PEA carries no interest rate: it is not a savings account. Its performance is that of the securities it holds. A PEA invested in an eligible European or global equity ETF has historically tracked the long-run rise of stock markets — negative years included.
Two factors turn that gross return into a real one: tax-free compounding, which typically adds several tenths of a percentage point per year over twenty years compared with the same portfolio in a securities account, and fees, which take just as much away if chosen carelessly. So the honest answer to “what return does a PEA deliver?” is: whatever your allocation earns, boosted by the tax treatment and trimmed by costs.
PEA-PME and PEA Jeune: the variants worth knowing
The PEA-PME-ETI — the plan for small and mid-sized companies (Plan d’Épargne en Actions PME-ETI) — takes shares in European SMEs and mid-caps, with its own €225,000 ceiling — counted together with the standard PEA within the €225,000-per-person combined limit. It gives access to growth companies at a modest ticket size, in exchange for higher volatility and thinner liquidity.
The PEA Jeune, reserved for tax-exempt 18-25 year-olds (students and apprentices), caps deposits at €20,000 and provides an early gateway into the wrapper. These variants follow the same five-year tax mechanics as the standard PEA.
PEA fees: what to compare before you open a PEA
Fees quietly nibble away at compounding: trading commissions, account-holding fees, currency conversion costs on foreign-currency securities, discretionary management charges. Two habits are enough to keep them under control: compare the broker fee schedule against your real trading frequency, and favour low ongoing-charge ETFs for the core of the plan.
To choose your provider — online bank, online broker or discretionary manager — our page on opening a PEA and cheap shares with strong potential compares current offers broker by broker, including international access outside the wrapper at Freedom24 or multi-asset trading at Vantage →.
The 5 costly mistakes to avoid with a PEA
- Withdrawing just before the five-year mark: a few weeks of impatience turn the exemption into full taxation — check the anniversary date of the first deposit before any exit.
- Confusing the deposit ceiling with the plan’s value: gains do not count towards the €150,000.
- Parking ineligible securities in it: direct purchases of non-European shares are refused or regularised; the securities account is the right container for international exposure.
- Ignoring fees over ten years: 1% in annual fees durably erodes compounding — more than most performance gaps between similar ETFs.
- Opening a PEA and leaving it in cash: the cash account of a PEA earns next to nothing; the tax advantage only works on securities actually held.
PEA vs compte-titres: which one should you open first?
For a French resident starting out, the order is almost always the same: the PEA first. It takes European shares and ETFs — the easiest core to diversify — with the best tax treatment on the French market. The securities account (compte-titres) then picks up the baton for international exposure: US and Asian shares, or non-eligible global ETFs. The two wrappers are not rivals: they stack on top of each other, each keeping its own rules. The table sums up the essential trade-offs.
| Criterion | PEA | Ordinary securities account (compte-titres) |
|---|---|---|
| Universe | European shares and ETFs | All the world’s stock exchanges |
| Tax on gains | Exempt from income tax after 5 years | 30% flat tax (PFU) or progressive scale, every year |
| Deposit ceiling | €150,000 | None |
| Dividends | Compound free of tax | Taxed as they are received |
| Best for | The long-term French/European core | International exposure and flexibility |
A detailed reading of both regimes can be found in our comparison of the difference between a compte-titres and a PEA, and the workings of the latter in our guide to the ordinary securities account.
How fast should you fund your PEA?
If you start with a lump sum, two schools of thought clash. A single deposit gets invested straight away: statistically, this strategy beats spreading the entry in roughly two cases out of three, because markets rise more often than they fall — at the cost of bitter regret if the entry comes just before a slump. Scheduled deposits spread the entry over time: they give up maximum average performance in exchange for precious psychological regularity, and turn temporary dips into opportunities to buy at a discount.
For most salaried savers, the question does not even arise: a monthly deposit matched to income remains the natural solution, and the first deposit — the one that starts the five-year clock — should be made as soon as the plan is opened, whatever its size.
FAQ: common questions about the PEA
What is the point of having a PEA?
The main benefit of the French equity savings plan is tax: after five years, withdrawn gains are exempt from income tax, and throughout the life of the plan, dividends and capital gains compound free of tax. It is the most advantageous wrapper for investing in European shares over the long term.
What are the drawbacks of a PEA?
The universe is limited to European securities bought directly, withdrawals before five years lose the tax advantage and close the plan, and only one PEA per person is allowed. Brokerage fees can also be slightly higher than on a securities account with the same provider.
Is a PEA profitable?
A PEA is as profitable as the securities it holds: it is not a guaranteed investment. Historically, diversified European or global equity portfolios have grown over the long term, with drawdowns that were sometimes severe — the favourable tax treatment rewards those who stay invested.
What interest rate does a PEA pay?
None: a PEA pays no interest. Returns come from dividends and from the growth of the shares or ETFs held. Only the uninvested cash balance can earn a modest return, depending on the provider.
How much do you need to open a PEA?
There is no legal minimum: some providers open the plan with no initial deposit, others ask for a few hundred euros. Since the date of the first deposit triggers the five-year rule, opening and funding the plan early — even modestly — sets the tax advantage running sooner.
What happens to a PEA left with no deposits or orders?
The plan stays open and its tax seniority keeps running: neither deposits nor transactions are required to keep a PEA alive. Securities already held continue their market life, dividends land in the cash account, and the five-year exemption is acquired simply with time — indeed, that is the early-opener strategy: deposit a modest sum, let it run, top up later.
Is the capital in a PEA guaranteed?
No: a PEA invested in shares can lose value, sometimes sharply in a crisis. Only the tax wrapper itself is “guaranteed” by law — the exemption after five years — and the securities remain the property of the holder, kept in custody by a custodian. Uninvested cash balances are not covered by the bank deposit guarantee scheme beyond the usual limits either, depending on their form.
Can you have more than one PEA?
No: only one standard PEA per adult French tax resident, whatever the number of banks. A married couple can hold two, and the PEA-PME forms a second, separate wrapper, within the combined €225,000 deposit limit.