EUROPE - Employee savings plans (ESPs) in France are set to see huge inflows of money, driven by new legislation, according to a survey by Celent Communications.
The catalyst has been the Fabius Act of 2001 which offered savings schemes for a limited period – on average around five years – with tax relief on contributions and payouts.
“The Fabius Act has laid the foundation to make this market segment a profitable one,” said Axel Pierron, author of the report, The employee savings plan market in France: Where is the growth opportunity?
“The Fabius Act extends the market by potentially more than 7.8 million additional employees in France,” he added.
With assets under management of E53bn and 9.5 million employees already holders of ESPs, Celent estimates 53% growth in capital inflows by 2005. It expects the annual asset flow to ESPs will be close to E14bn in 2005.
The boost to the schemes from the Fabius Act are threefold: a new standardised product can now be launched to capture the market, unlike the employer specific schemes which existed before; the schemes are being opened up to smaller employers, so boosting the number of potential savers; and the internet will open up the savings products directly to the employees, who will be able to manage their own savings.
Providers need to be more proactive to encourage more take up of the products by employees, according to Celent. “French society does not yet see the ESP as a retirement package. Financial institutions now need to find new growth opportunities in this market and we think that the development of online tools for employees will be crucial,” said the report.
Celent estimates that online tools could increase average savings per employee from E737 in 2002 to between E937 and E1,100 in 2005.
At the moment the ESP market is dominated by a few large players - with the top five players controlling 70% of the market. Natexis-Banque Populaire controls 21% (through Interepargne), Société Générale has 15%, BNP Paribas and Axa each have 12% and Credit Lyonnais Asset Management has 10%.
Growth in the market has come from those allocating between E750 and E1500. The market segments saving more than E1,500 or between E150 and E750 have shrunk.
“We think that financial institutions should concentrate their efforts on the market segment contributing less than E1,500,” advised Celent.
The plans are not dedicated to cash savings alone. Schemes often include different type of assets, such as shares, funds, bonds, with no nationality restrictions.
Pierron believes the ESP market offers great opportunities for foreign asset managers: “The growth of the ESP market will require more and more management selection - a process in which French companies don't have as much experience as Anglo-Saxon ones - and more fund managers.
“So there is a great opportunity for foreign players on an institutional level. Especially since institutions offering ESPs are shifting from domestic to international financial products - they are realising that they can no longer manage this only themselves.
“Also some foreign players are entering the French ESP market to gain experience on the French market, expecting that the Raffarin government will attempt to change the pension system, creating a tremendous opportunity for foreign asset managers.”
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