FRANCE- The privatisation of France’s utilities, Electricite de France (EdF) and Gaz de France (GdF) could have a dramatic impact on French energy industry's pensions system.

EU demands for an open utilities market has led to competition between the French utility companies, and to criticism of the state support they receive. The government plans to privatise the and to float GdF at the end of 2003 and EdF in 2004, with EdF valued at e50bn and GdF at e5bn.

EdF and GdF, alongside other smaller similar companies, belong to the IEG scheme, the pension system for electric and gas industries in France. The IEG offers special pension arrangements to members. The generous pensions benefits and special arrangements enjoyed by the 180,000 or so employees, and EdF and GdF will be wiped out when the companies are privatised.

Instead, EdF and GdF will join France’s second-pillar pay-as-you-go scheme under AGIRC-ARRCO. Unions claim that the benefits under AGIRC-ARRCO are worse, and that, with administration fees taken out, their pensions will be smaller.

Those close to retirement age are concerned. Yesterday saw the demonstration in Paris of 60,000 public sector unionists protesting against privatisation.

EdF and GdF maintain their schemes are sufficiently healthy, but with a large increase in the number of pensioners expected between 2020 and 2025, plans for reforms must be put in place or EdF and GdF will not be able to cope financially under the AGIRC-ARRCO pension system.

The annual cost of pensions for EdF and GdF would rise to e3bn by 2010, and to e5bn by 2050 from today’s figure of e2.6bn.

As yet the future of the IEG pension system is undecided. The social partners of the IEG (the unions and employers of the public sector electricity and gas industries) have expressed their concerns at creating a new pension system, but “solutions” are welcomed. Any solutions will be put to the government next year.

The most likely proposals, according to reports in the French press, will be for the state to help with payments by the privatised companies to AGIRC-ARRCO, and the establishment of a new system financed by contributions from the IEG, and managed by the IEG.