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APAPR European Pensions Conference 25 October 2011

APAPR European Pensions Conference 25 October 2011. Pierre BOLLON Director General. Takeaways from the French experience in DC Pension Schemes. A DC Pension Scheme in France : the PERCO Takeaways. APAPR / EFRP – October 25th, 2011. 2. Pension system in France.

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APAPR European Pensions Conference 25 October 2011

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  1. APAPR European Pensions Conference 25 October 2011 Pierre BOLLON Director General

  2. Takeaways from the French experience in DC Pension Schemes • A DC Pension Scheme in France : the PERCO • Takeaways APAPR / EFRP – October 25th, 2011 2

  3. Pension system in France • France has still a strong PAYG system but its high replacement rates will decrease, as a consequence of successive pension laws (1993 / 2003 / 2010) • Procees of retirement savings represent currently less than 5% of retirees ressources, clearly not enough to maintain living standards in the future • In 2003, two new voluntary pension schemes were created by law: • the PERP (retail insurance contract / EET) • the PERCO (occupational / 401 K like / TEE) APAPR / EFRP – October 25th, 2011 3

  4. PERCO : How does it work? • Professional scheme implemented at company level by collective agreements between employer and unions representatives • Employees voluntary contributions can be matched by the company up to 300% and 5,600€ per year • Each PERCO must offer an investment choice between at least 3 mutual funds; one option has to be a lifecycle investment fund. Employees and employers sit at fund boards • Sums are available at retirement age (or earlier if used to purchase a main residence) • At retirement age, beneficiaries receive their accumulated capital (free or programmed withdrawals) and can buy if they wish a life annuity APAPR / EFRP – October 25th, 2011 4

  5. Figures about the PERCO • PERCOs are boosting: 5 B€ / + 35% in 2010 • 125,000 companies(+ 19% in 2010) provide Perco to 690,000 employees (+27% in 2010) • Still a long way to go to get a sufficient coverage APAPR / EFRP – October 25th, 2011 5

  6. New mesures to increase coverage In 2008 and 2010, French Authorities adopted measures to improve funded occupational pension schemes coverage: Mandatory annual collective negociation on pension schemes PERCOs can now be designed with automatic enrollment (and opt out) Employers have to offer a Pension Scheme (collective insurance contract or Perco) to all employees if a DB scheme (usually insurance « top up »)is provided to management APAPR / EFRP – October 25th, 2011 6

  7. Takeaways • The financial markets /sovereign debt crisis is bad news both for Funded schemes and for PAYG schemes • Voluntary systems only develop if they do not force life annuity payouts. Flexibility, along with proper tax incentives, safety of design and sound asset management are of utmost importance • Compulsory systems bring complete coverage and economies of scale but inevitably entail greater interferences by the State, (investment rules, … and are even sometimes unfortunately seen as a cheap source of financing its budget gap • European regulators’ aim should be to foster the development of funded schemes and not add burdens (e.g. SII, FTT, mandatory guarantee, etc)on them • Astazi, nu putem spune ca exista un sistem « cel mai bun », dar putem invata din experienta fiecaruia lucrand impreuna la nivel european. APAPR / EFRP – October 25th, 2011 7

  8. www.afg.asso.fr APAPR / EFRP – October 25th, 2011 8

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