The French seem to enjoy making things complicated and in constructing their system of retirement provision they have been true to form. With a mesmerising combination of federations, associations, institutions, groups and sub-groups, observers have their work cut out to make their way round the complex maze that is the French pensions system.
ARRCO-AGIRC is the dominant force in the French second pillar. AGIRC (general association of management pension funds) was established in 1947 and covers managerial employees’ earnings that are above the social security ceiling. ARRCO (association of complementary pension schemes) was established in 1961 and supplements the pensions of all workers up to the social security ceiling. Between them ARRCO and AGIRC cater for most salaried workers and management across the agricultural, industry and service sectors covered, and thus the bulk of the French working population. Each system consists of a number of individual funds, or caisses de retraite (CDRs), which are often industry-specific. The number is declining steadily due to mergers of CDRs. According to figures from ARRCO-AGIRC there are 39 ARRCO CDRs and 27 AGIRC CDRs compared with 77 and 34 respectively in 2002 and 83 and 39 respectively in 1999.
Given the complexity of the system the merging of organisations can’t come soon enough. After all, who needs duplication of effort? The government is also encouraging ARRCO and AGIRC to merge because they do the same work and operate with more or less same contributions and payments. They already work together and discuss matters of common interest through an association known as a GIE (group of common economic interest). One local consultant believes that a merger to take place within the next 10 to 15 years.
However, there are a number of categories of salaried employees which fall outside the system. The special status employees benefit from schemes that were set up prior to the establishment of the ARRCO AGIRC systems such as those that cater for barristers, employees of chambers of industry and commerce, employees of civil aviation and private sector port workers.
A further category that is not part of ARRCO/AGIRC consists of employees of the public sector employed on a contractual basis and which therefore do not have civil servant status. Examples include university teaching staff. The government believes that there are too many civil servants so it tries to reduce the number by putting as many as possible on contracts. IRCANTEC takes care of this category.
The civil service, the military as well workers in the state armaments sector, have their own scheme which was established prior to ARRCO and AGIRC. This consists of a single scheme intended to provide the equivalent of both the basic state and complementary schemes up to a maximum pension of 80% of final salary. Local government and nurses are covered by a similarly structured scheme managed by CNRACL.
The Fillon Law of 2003 introduced an additional compulsory scheme for these two groups which came into effect at the beginning of last year. This covers all income not taken into account in the calculation of the pension such as bonuses and overtime.
The final category of salaried employees has one scheme to cover both the basic state and complementary pension schemes. These are almost all in deficit because they are very old regimes with many pensioners but a decreasing number of contributors due either to redundancies (for example the national rail company SNCF) or to major changes in government policy such as the replacement of the Banque de France with the European Central Bank. Other categories include sailors, legal support staff, the French national theatre and the French national opera.
The deficits are also partly due to the fact that the pension rights secured by the unions are very generous but the contributions are very low. In the case of Electricité de France (EDF) and Gaz de France (GDF), collectively known as IEG, pension payments amounted to E5bn per year compared with contributions of E3bn.
EDF and GDF were transferred from this group to ARRCO AGIRC following privatisation. Their new CDR, the CNIEG, covers both the compulsory complementary element and an additional voluntary pension fund on top. The E2bn deficit was paid as one sum to cover the whole predicted future deficit of the basic state part (CNAV). The complementary part was in deficit so the industries were offered the possibility of making good the deficit. IEG declined this option, so ARRCO-AGIRC will only be taking responsibility for a part of the pension rights.
The government wants to move all funds from this category into the ARRCO AGIRC system. But to do this it will have to pay the current predicted future deficit of the scheme.
Similar plans are afoot for SNCF (state railway) and for RATP (Paris metro) schemes.
Other schemes in this category that have already moved over to the ARRCO-AGIRC system include the state water company and Crédit Foncier (1991), Air France ground personnel and AFB Bank (1993), Banque Populaire and the social security bodies (1994), savings banks (1996) and employees of the agricultural service sector (1997).
Membership of the ARRCO and AGIRC systems has increased substantially. Since 1999 ARRCO has seen membership increase from 15m active members and 9m pensioners to 17.5m and10.7m pensioners. In the same period AGIRC membership has increased from 3m active members and 1.6m active pensioners to 3.6m active members and 2m pensioners.
Of the non-salaried workers, farmers, shop owners and industrialists represent the largest part. But for some there was disappointment. They imagined that when they sold up their farms and shops they would be rich so they did not consider it necessary to start a pension. But their property has not raised as much as they had expected.
To alleviate their situation the Loi Madelin of 1994 made it possible for all self-employed workers to set up a special defined contribution scheme with extra tax advantages over normal DC schemes.
In addition the Loi Fillon of 2003 made it compulsory for all categories of employee to have both first and second pillar coverage. This came into effect at the beginning of last year.
All categories of non-salaried worker have two separate schemes, one to cover the basic state provision and the other to cover the complementary portion. They each have their own CDR which in each case manages both schemes.
For the purpose of administering the individual accounts, communicating with members and paying the pensions, many CDRs have joined together to form what is known as a ‘groupe de protection sociale’, or social protection group. The cost of operating these functions on their own would be too high. The groupe allows member organisations to share costs such as computer technology.
Each ‘groupe’ contains a selection of ARRCO and AGIRC institutions, an ‘association des moyens’ or service group which provides the administration services to the group and an ‘assurance des personnes’ or staff insurance scheme which offers mainly health insurance services. Some organisations set up a portfolio management group for company savings but these are rare because portfolio management is normally outsourced.
The trade unions are very powerful in the CDR system. They take most of the decisions using in-house specialists. The ‘groupes’ are often collections of CDRs represented by a single union. If there is another groupe in which the same union is represented the unions may merge the two. The government is now encouraging the merging of CDRs but they are not forcing the pace because there are some CDRs, notably the larger ones, that like being independent.
Until around seven years ago CDRs determined the contribution and benefits levels on an individual basis. Now ARRCO and AGIRC have reasserted control and are starting to define the contributions and benefits at a national level. Without central control it would be difficult for a worker to go from one CDR to another as well as to merge a number of CDRs.

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