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Impact investing


Pensions chemistry

French chemical giant Rhône Poulenc, faced with a financially and demographically challenged national retirement system in a business where attracting employees of the right calibre is essential and competition fierce, decided it needed a strong supplementary company pensions programme.
The company also needed something for its French base to match the pension funding systems of affiliated groups in different countries of the world.
As Bruno Bedier, director of social relations at the Paris-based multinational, explains: A company like Rhône Poulenc could not afford to see a 'brain drain' of quality staff, from France to the US for example, just because the em-ployee benefits appear more at-tractive. With this in mind, the crux issue was to decide how we could implement a system which was both suitable to a young employee of 25 years of age and a worker further down the career path. For ex-ample, a young worker may be loath to start topping up what he/ she believes to be an adequate and costly obligatory social pension, with a company retirement initiative, untouchable before age 60."
The final system brought in by the group comprised what Bedier dubs, "a supple savings scheme", which he says may be used by an employee either for retirement needs or for other major lifestyle requirements.
"This model fitted in with existing French company savings models, whilst moving us towards something approaching the US 401k plans - although, significantly French law only requires that the savings be kept in an account for five years before they can be divested with tax advantages."
As a result Rhône Poulenc took an existing company savings vehicle and created three new fund tiers within it. Each has different investment criteria - for example a dominant equity fund and another dominant money market fund.
Employees are then invited to contribute on a voluntary basis, with an eight-year investment ring fence, and can shift between funds as they wish, depending on their needs or how close to retirement they are.
"At the same time the company matches whatever level of saving an employee has made, but pays this into a different fund, in order to keep it within the capital flows of Rhône Poulenc," Bedier explains.
The advantage of the system, he says, is that it offers employees flexibility over how much they wish to invest, while guaranteeing a generous company incentive that can be drawn later without excessive fiscal penalty.
"It is also possible for an em-ployee to then take advantage of 'popular' eight-year savings schemes with banks and insurance companies in France, by shifting the savings out of Rhône Poulenc at a given moment and avoiding capital gains tax entirely at divestment," he notes.
"We think we have achieved a flexible scheme that takes into account the needs of a diverse workforce in the modern employee benefits age. And we were the first company in France to introduce such a system, which has now been taken up in form by groups such as Total," Bedier comments. Higher up the company ladder Rhône Poulenc also has a defined benefit top-up system for its top managers and directors, who, Bedier explains, might not otherwise have received a pension corresponding to their standing within the company.
All contributions within the company go first to an administrative manager, Inter-Epargne, part of Banque Populaire. Inter-Epargne also manages the company's money fund and JP Morgan manages the equity portfolio, both principally through Sicavs and a few mutual funds. "Asset allocation is proposed by the manager, decided upon by a parity commitee of half employee and half company representatives, and is of course subject to the COB regulations of the Paris Bourse."
The system, however, is exclusive to Rhône Poulenc's French operations, and Bedier adds that mobile employees are invited to join the appropriate retirement scheme in their country of work, should they be posted abroad.
Take-up for the scheme is at about two thirds of the workforce at present, but even this healthy figure prompts Bedier to question what the other third are doing: "The answer is we just don't know."
At the end of the day, he says, "we are offering to match whatever an employee wishes to save - so not participating means receiving less money from the company. It is certainly a mysterious anomaly we are presently examining.""

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