FRANCE - PERCO, France’s collective retirement saving plan, is too expensive for the state, while a number of its investments have generated dire returns, according to the country’s Court of Audit.

France’s Cour des Comptes also called on the government to restrict conditions allowing contributors to remove their savings from PERCO before retirement.

Implemented by the 2003 pensions reform law to encourage French workers and companies to use a capitalisation system to complement the traditional system of pension distributions, the PERCO enables employees who contribute to this type of plan to take their savings back only for the purchase of a residential property.

The Cour des Comptes argues that, since contributors can take their money out of the PERCO before their legal retirement age, such a plan cannot be considered as a retirement saving system.

In addition, the court notes that the tax contributions paid by employers - which represent three times the amount of contributions paid by the employee - are not subject to duty, leading to an important cost for the state.

However, PERCO plans recorded a strong increase in 2010, with the number of businesses offering them increasing by more than 18%, according to the French Asset Management Association (AFG).

These plans, which receive payments based on an employee’s desire to save, are invested in three asset classes: equities, bonds and money markets.

But the Court des Comptes points out that the investment made on behalf of the contributors has not always provided security and insists that the return provided by some investments in several asset classes have shrunk drastically due to the 2008 financial turmoil.

The average PERCO plan has lost 6% a year between 2007 and 2009, according to the court.