FRANCE – AFPEN, the French association of pension funds and retirement regimes has created a template for occupational pension funds in France, updating the initiative of 1997’s Loi Thomas and aligning itself with the direction of the European directive on second pillar provision.

Under the proposal, employers and employee representatives would sign an agreement called a protocole d'épargne retraite (PER) to establish a retirement scheme.
Subsequently, they would set up a representative body or Organe de representation (OR), which would underwrite the scheme with an institution d'épargne retraite (IER).

The IER, which would commit to an AFPEN code of good conduct offers a selected retirement promise called a Plan Partenarial de Retraite or PPR, under which the market risk is assumed either by members and beneficiaries or by the IER itself.
The proposal requires that the state provides a tax incentive to allow for deduction of contribution from profit and from private income with an incentive extended to non taxable income. The government would also set up a guarantee fund up to a limited amount to be financed from investment income.

Vincent Vandier, executive director of AFPEN says the association is exchanging views with the French authorities, who want to have their own position alongside the European Commission’s endeavours.
“There are no real pension funds in France, so we taking the Loi Thomas where the decree was to have existing regulation under the insurance code and developing some of the weak points of the Loi Thomas.
These weak points, he notes, included the way the scheme was set up between employers and employees and also the adequacy of prudent investment rules.
“On both sides we have improved things,” he adds.

He points out that the proposal was created with the European Directive in mind: “I would say we are in line with the European directive.”
“The proposal is still under the insurance way of seeing things, but this takes into account market risk and longevity.

Vandier believes the sole difference between AFPEN’s proposal and an ‘Anglo-Saxon’ pension fund is the semantics of whether you call the need for excess assets to cover the liabilities a buffer or a solvency margin.

At present such a vehicle is not possible under French law, however, as Vandier notes:
“What is possible up until now is to be under the insurance directive because there has to be a solvency requirement of 4% of liabilities.
“This is an example for French companies, but where it is difficult is that we need a law.
“It is an occupational scheme and an example, but it should be a rule.”

Further information on the IER proposal can be obtained from AFPEN.