When France underwent its major pension reforms last year, all eyes were on the big issue of public sector change - the hurdle on which French governments had stumbled badly in the past.
That the government finally won its battle for actuarial equivalence between public and private sector pensions with future contribution increases and prolonged working lives for both, undoubtedly changed the face of retirement provision in France.
Bearing in mind the country’s recent difficulties with EU budgetary requirements, the news that it was getting to grips with potential future problems was openly embraced, as evinced by the reaction of the European Commission: “This reform is clearly to be welcomed, as France is now in a considerably better position to meet the budgetary costs of ageing population.”
There was, however, a caveat: “Despite this major improvement, risks of imbalances in the long term cannot be ruled out.”
The French government had not ignored this risk of possible future ‘imbalance’. The second major ‘partie’ of last year’s ‘Loi Fillon’ involved the government’s plans to extend the country’s regime of private and collective savings schemes into a clear retirement context.
The bill introduced two new pensions savings vehicles – the PERP (Plan d’Epargne Retraite Populaire) an individual savings plan for retirement, and the PERCO (Plan d’Epargne de Retraite Collectif) an extension of the former 10-year voluntary company savings plans.
Pierre Yves Chanu, an adviser on pensions with one of France’s largest unions, the Confédération Générale du Travail (CGT), says that while the ‘epargne retraite’ aspect of the law gained less attention, he believes it may be just as important going forward, representing, as it does, a tax advantaged transformation of retirement savings in France with a nod in the direction of Anglo Saxon type pension schemes.
While the final decree for the new law has yet to be released, Chanu says one area of discussion still taking place regarding the PERCO is what the possibility will be in terms of annuity provision, now that the 10-year vehicle has been extended to provide for retirement saving.
“The decree is still not out, but as the PERCO belongs to the law governing epargne salariale, there is still work going on to put in place some sort of annuity aspect into the epargne salariale domain.”
These developments could lead to a greying of the boundaries between providers in France.
If they are not clarified, Chanu fears that France could experience some of the same problems that have hampered German pension reforms. “We don’t know if this resembles a 401k plan or a DC plan and we don’t know whether we are really in savings plans or retirement plans.”
One issue, he explains, is just who will manage the PERCO plans, combining as they may an insurance type arrangement under the epargne salariale law, which requires the collective accord of the company, ie, between employers and unions. Chanu suggests that France could well see new hybrid organisations moving into this arena.
Michel Piermay, president of Paris-based consultant Fixage points out that the PERP comes under life insurance regulation and will likely be run by insurers, who he says are predicting inflows of some e3bn per annum in contributions.
The PERCO, he notes, under epargne salariale regulation would tend to be the domain of banking groups, which already offer funds to companies under the existing savings regime.
The addition of an annuity provision, however, would suggest that life insurance contracts will form part of the equation – not so much of an issue perhaps for France’s bancassurance groups – although employees will be able to shop around for providers at retirement age.
This appears to be borne out by recent market developments. In January BNP Paribas launched a division aimed at the expanding French pensions market.
The new unit at BNP Paribas Epargne & Retraite Entreprises, acknowledged the changing scene by bringing together the saving plans and collective pensions business of BNP Paribas Epargne Enterprise and BNP Paribas Assurance.
Hot on its heels came the announcement by Credit Agricole that it was creating a new pension line to suit the Fillon reforms.
The product: Retraite Verte, or Green Pension, is targeting farmers, professionals and company employees and will cater for users’ major expectations such as the creation of “withdrawal capital” or “life-income”.
Certainly on the PERP side of the fence things are moving forward in anticipation of the final letter of the law, despite predictions that the PERP decree will not be out before June this year.
As Piermay points out, advertisement for product has been on boulevard hoardings for a few months now. “We’re in the phase of pre-sales and the figures say that already more than a million people have shown interest in the products.”
Piermay believes the French are enthused by the new pensions offering, mostly because they mirror existing savings product, just with a different label on.
Some, however, do not feel the government has gone far enough in encouraging greater funding for retirement.
Marie-Laure Dufreche of Paris-based Sauvegarde Retraites, a 55,000 strong member lobby group of retirees seeking to increase the possibility of funded pension provisions for future generations in France, believes the government has taken steps in the right direction, but that a proposed ceiling on contributions could hamper real personal pension growth.
“What we wanted from the beginning of the reform was defiscalisation of capitalised retirement that did not have a ceiling.
“We don’t yet have the final details of the law, but we have heard that there will be ceiling and we find this insufficient.”
The group, which has been in existence for five years, says it is not just a lobby outfit for a wholesale switch to capitalisation: “It wouldn’t be prudent in France to replace pay-as-you-go by a funded system.
“On the other hand, countries like Sweden and Germany have introduced increased capitalisation and we believe that complementary funding is a good thing, especially if the total amount saved can be tax deductible.”
Nonetheless, the organisation is targeting what it calls the inequitable public sector plans in France, the so-called ‘regimes speciaux’ such as those employed by Eléctricité de France (EDF) and the RATP (French Metro and urban transport company).
“Workers in these organisations (EDF and RATP) contribute very little and can leave employment very early with large pensions. We want this to end. They should finance their retirement themselves instead of being a burden on the collective.”
The other big post reform political debate in France has focused on the number of points needed for retirement in France under the complimentary portion of repartition administered by Arrco/Agirc. This is calculated and negotiated mostly on an inter-professional basis between employers and social partners.
In summary, the major changes under Fillon are that social security pensions will be calculated on the basis of 160 trimesters instead of 150, thus decreasing the state pension for those with less than 160 trimesters to their credit.
Additionally, there will be an increase in state pension contribution rates and companies will no longer be able to ‘retire’ employees before age 65 even if they have the full contribution period.
How the above changes will finally impact mandatory pensions from ARRCO and AGIRC is not yet fully known.
However, in high profile discussions last November, four of France’s main unions, the CFDT, CFE-CGC, CFTC and FO reached an agreement with the French employer body MEDEF on tariff levels for retirement. Not all the unions, however, had agreed in principle with the French government’s overall retirement reform.
Only one of the major unions, the CGT, refused to ratify the November accord. Chanu at the CGT claims there were a number of outstanding issues including pension accumulation rights for women that prompted the union not to sign.
But he notes that the basic clash concerned what the union wanted as a living retirement income and what the employers said they could afford.
“We wanted the highest possible reference for the calculation of retirement points and the employers wanted the cheapest possible.
“For us MEDEF was making propositions which were unacceptable.”
And he claims that there could well be industrial action to follow in the coming year as a result. “We continue to say that another reform is needed and envisage other conflicts in the months to come on this issue.”
The French government may have tasted victory in last year’s pensions reform – a victory that many argue was fundamental in balancing the books for future generations. However, the reality in France is that laws can sometimes change considerably in the stage between ratification and publication
It’s a well-worn cliché, but the devil in the French pensions reform may yet prove to be in the detail.

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