FRANCE - The concept of equity-based pension plans may finally be taking hold in France following an increased preference by employees for stock market-based corporate savings schemes.
And according to one industry expert the existing system must change if it to survive the pressure imposed by a funding gap that could run into billions.
Commenting on this year’s French elections, Emmanuel Ferry, an economist with Paris-based brokerage Exane, said: “The next government is going to have to reform the retirement system.
“But we should expect reform reducing discrepancies between private and public sector pension schemes, an increase in employee contributions, probably through new solidarity taxes, and also an increase in the retirement age and a decrease in benefits.”
Private pensions are not commonplace in France, and the French pension system has traditionally relied on bond and money-market investments to bolster returns from the pay-as-you-go system.
Calls for change have been given extra impetus by rough estimates that give the existing system just under 20 years before it buckles under the pressure of a near EUR150bn funding gap.
According to recent reports, corporate saving plans boasted EUR12.8bn assets by 2000, with 90% as equity-based investments. Only 3% of French companies offer such schemes. The plans are tax free and incentives have been extended to small and medium-sized businesses.
The corporate savings plan, or Plan Partenarial d'Epargne Salariale Volontaire (PPEVS), was introduced last year, with the aim of attracting around EUR10bn annually into the French bourse.
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