The French asset management association is calling for the creation of an individual pensions product consistent with the pan-European personal pension (PEPP) being explored in the EU, and for the creation of cross-border pension funds.

The proposals were made by the Association Française de la Gestion financiére (AFG) in a white paper published last week on expanding retirement savings in France.

It housed its call for cross-border pension funds under the heading of strengthening occupational pensions in France, especially collective company pension savings schemes.

These go by the acronym PERCO (plan d’épargne retraite collectif).

The AFG said a European pillar should be added to the PERCO to allow companies to manage pension plans from France for all European employees.

It said this required creating a vehicle compatible with the EU pension fund legislation, the IORP Directive, and that this could be achieved under the Sapin II law.

Laure Delahousse, deputy director general at AFG, told IPE the idea was to create a new type of IORP-compliant pension vehicle asset managers could use to offer their clients a way to manage defined contribution plans more effectively in different European countries in a single pension fund.

“The Sapin law provides for the creation of such a pension fund via ministerial order, so no new law would be needed,” she said.

The lack of a universal pensions saving product for multinational companies with a mobile workforce and employees across Europe has also been remarked on by Jean Eyraud, president of the French institutional investor association Af2i.

Around 85 cross-border pension funds already exist, mainly set up by multinational companies, but financial institutions like asset managers are also turning their attention to the vehicles.

For example, French asset manager Amundi has a pan-European pensions vehicle in Luxembourg and recently said it had already attracted 10 multinational companies to use it.  

The AFG’s white paper also sets out other measures to promote the PERCO, such as a cut in employer taxes on contributions and opening the plans to civil servants and certain public employees. 

PEPPing up personal pensions

Another major aspect of the AFG’s blueprint is the proposal for a new personal pensions product, which the association already flagged in its “roadmap” for the French asset management industry in November.

The association said it was important not to rely exclusively on occupational pensions when it came to retirement saving.

“It is necessary to develop individual products,” it said, adding that existing personal pension products were not equipped to meet the needs of a large number of people.

The association said the envisaged new product was “largely inspired” by the pan-European personal pension (PEPP) product being prepared at the EU level.

Delahousse said: “We want to create the same thing in France, which could be subscribed to by individuals all over Europe but is mainly for French citizens.

“We strongly support the PEPP initiative, and we are calling on the government to create a new product that is consistent with the PEPP with an appropriate tax treatment”.

The question of the tax treatment was one of the issues discussed during a European Commission hearing on the PEPP in Brussels in October last year. 

In the AFG’s mind, the product it envisages would appeal to a larger client base than the main existing personal product, the PERP, in particular because it would give individuals choice over how they use their retirement pot.

Under the PERP, individuals must buy an annuity when they reach retirement.

According to the AFG, the new product should be available to a broad range of individuals, including the self-employed, civil servants and mobile employees working in Europe.

Other aspects include that contribution amounts should be flexible up to a ceiling, access to the retirement savings pot blocked until retirement except in exceptional circumstances, and that individuals be free to choose what to do with their savings at retirement date, such as opting for a capital lump sum, an annuity, or free or progressive withdrawals.

The individual would be able to choose between three investment management options: life cycle, self-select or delegated management.

The default option would be the life cycle strategy, as is the case for the PERCO at the moment.

The other main pillar of AFG’s white paper is a call to improve the information available to individuals about their pension. 

Transforming retirement saving into a source of long-term capital to finance the French and European economy is a central theme running through the association’s proposals.

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