FRANCE - The French supplementary pension system will not start to develop until the government has made a final decision on taxation and regulatory issues, an analyst has warned.

"Many people have been hesitant to start supplementary pension plans because they are not sure whether in 10 or 20 years these plans will still exist in their current form and whether the tax treatment will be the same," Boston-based Aite Group senior analyst Phillip Silitschanu told IPE.

This uncertainty is one of the "major roadblocks" for France's supplementary Plans d'Épargne pour la Retraite Collectif (PERCOs) and Plans d'Épargne Retraite Populaire (PERPs) to develop in the way initially envisaged by the government.

Meanwhile, insurance companies are taking advantage of this, Silitschanu said. "They are able to offer competitive unit-linked plans with more stable tax structures. So a lot of investors in France are turning to insurances for retirement."

However, he is convinced that there will be developments under the presidency of Nicolas Sarkozy. "I think part of the mind set will change because the new government is more capitalistic, less socialistic, more realistic."

He added it would not need much to make the system work. "The basic structure they have in place is a good idea that is just poorly executed. The government just needs to finalise the details, set them in stone and then not touch them anymore."

He added: " I think that will happen within the next year or two. And once it has there should not be any major reason other than cultural issues why investors in France would not turn to them."

A second roadblock for supplementary pensions was a continuing belief among French employees in the government's ability and duty to provide for their retirement, Silitschanu said.

"All it needs is some 'tough love' from the government," he added. "It has to tell people how much they will get out of the state pension at retirement and how much they will need to live and then point out that the two figures do not match."

However, the introduction of mandatory contributions is unlikely within the next few years, Silitschanu said. "But eventually it may have to happen otherwise the retirement age will have to be pushed up considerably."

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