The French finance ministry yesterday unveiled a draft law that foresees a new type of supplementary pension institution and regulatory regime, designed to relieve the management of retirement assets from investment restrictions under Solvency II.
The draft law has been interpreted by some national commentators as amounting to the introduction of pension funds “à la française”.
Philippe Crevel, director at Cercle de l’Épargne, a savings and pensions think tank, for example, described the move as such.
“Cercle de l’Épargne, which has always campaigned for the development of a properly funded pillar, is delighted,” he said.
Nonetheless, the government should have gone further, said Crevel.
The proposal in question forms part of a three-pronged projet de loi – “Sapin 2” – that builds on a 1993 law bearing that name, after the French finance minister Michel Sapin.
The fresh legislative proposal tackles transparency, the fight against corruption and the “modernisation of economic life”.
The pension-related proposal is made in the context of the latter.
Picking up ideas that had already been envisaged under since-abandoned legislation sponsored by the economics minister, Emmanuel Macron, the draft law Sapin 2 proposes the creation of “a new form of organisation” operating supplementary pension provision.
In France, supplementary retirement provision is predominantly insurance-driven – the second-pillar pension market is relatively small, and the biggest funded schemes are backed by the state in some way.
However, insurers are governed by Solvency II, which came into force in January, and that, according to the French finance ministry, restricts insurance companies’ investment choices to the detriment of long-term savers and the French economy.
The government singled out capital requirements and restrictions on equity investing as the most problematic aspects of Solvency II.
To address this problem, the government has proposed to create, at national level, a new type of organisation for supplementary pension provision “while maintaining a high level of protection for the insured”.
Some €130bn of assets under management are concerned by the proposal, according to the finance ministry.
It is unclear whether the transfer of assets to these new types of organisation would be voluntary or mandatory – the language of the draft law suggests it would be optional.
The creation of these new pension institutions under their own regulatory regime would unlock “several dozen billion euros” to finance French companies, mainly via equity investment, according to the ministry.
It emphasised that the proposed law did not undermine the pay-as-you-go system, and that the reform only addressed pension institutions’ investment choices so they could “better benefit the financing of the economy and offer savings the prospect of higher returns”.