PEA or brokerage account: the honest maths

In an ordinary brokerage account (compte-titres, or CTO), a capital gain bears the single flat-rate levy: 30 %, made up of 12.8 % income tax and 17.2 % social contributions.

In a PEA older than five years, the income tax portion disappears. Only the 17.2 % of social contributions remains. That is a 12.8-point gap on the gain — and it compounds too, since it applies to capital that was never eaten into.

Amounts kept after tax. The gap is far from symbolic: on a €150,000 gain it represents close to two years of median salary.

1. Five years. The tax advantage is only secured after five years of holding the plan. A withdrawal before that point generally closes the plan and forfeits the favourable regime. The clock starts at opening, not at the first contribution: opening a PEA with a few hundred euros, even without a settled strategy, starts the clock. It is probably the most profitable decision a French saver can make in ten minutes.

2. A €150,000 cap. It applies to contributions, not to the plan's value: a fully funded PEA can be worth far more without any problem. Beyond the cap, a brokerage account takes over — the two wrappers complement each other more than they compete.

3. A universe restricted to European equities. This is the least well understood constraint, because it is largely worked around. Some ETFs held inside a PEA track non-European indices — the S&P 500, the MSCI World, emerging markets — through synthetic replication: the fund holds a basket of European shares and swaps its performance for that of the target index, under a contract with a bank. The economic exposure is the index's; PEA eligibility is preserved.

The PEA is not superior in every circumstance. The brokerage account keeps four clear advantages.

• No cap, and no minimum holding period.
• The whole investable universe: individual shares outside Europe, bonds, commodities, physically replicated ETFs on any index.
• Offsetting losses against gains in the same year and the following ten — a mechanism the PEA does not have.
• Full liquidity: withdrawing part of it affects nothing else.

The most common set-up is therefore not "one or the other" but one then the other: a PEA opened early and filled first, a brokerage account beyond the cap or for whatever the PEA cannot hold.

France's third wrapper, often mentioned in the same breath. After eight years it applies 7.5 % income tax after an annual allowance — €4,600 for a single person — plus 17.2 % social contributions, so roughly 24.7 % before the allowance, and appreciably less once it is taken into account.

It therefore sits between the PEA and the brokerage account on tax, with two differences in kind: annual management fees that weigh on performance year after year, and a distinctive inheritance treatment that is its real argument. Comparing life insurance to a PEA on the tax rate alone misses the point.

Cumulo's calculator covers all three French regimes: brokerage account at 30 %, PEA older than five years at 17.2 %, life insurance older than eight years. Select France, pick the wrapper, and compare the net capital over your real horizon.

Compare PEA and brokerage account

Is a PEA always better than a brokerage account?

On tax, yes, after five years: 17.2 % of social contributions against the 30 % flat-rate levy. But the PEA caps contributions at €150,000, restricts you to European equities and does not allow losses to be offset. For a large portfolio or non-eligible assets, a brokerage account remains essential.

Can you buy an S&P 500 or MSCI World ETF inside a PEA?

Yes, through synthetically replicated ETFs: the fund holds a basket of European shares and swaps its performance for that of the target index. The economic exposure is that of the S&P 500 or MSCI World while PEA eligibility is preserved. In exchange, these funds add a dependency on the swap counterparty.

What happens if I withdraw money before five years?

A withdrawal before the plan's fifth anniversary generally closes it and forfeits the favourable tax regime. That is why it is common to open a PEA very early with a token amount: the clock runs from the opening date, not from the first significant investment.

Does the €150,000 cap apply to the PEA's value?

No, only to total contributions. A PEA funded to €150,000 can be worth €400,000 with no consequence: the valuation is not capped, only the money paid in.

Do I have to choose between a PEA and a brokerage account?

Rarely. The most common approach is to fill the PEA first for its tax advantage, then use a brokerage account beyond the cap or for assets the PEA cannot hold. The two wrappers are complementary.