FRANCE - Ségolène Royal, the Socialist candidate for the French presidency, is threatening - if elected to power - to remove tax benefits from pension funds which speculate in real estate rather than in companies perceived to be creating jobs.

Royal has lashed out at French pension funds, accusing them of displacing people through their speculation in domestic real estate.

Speaking in east Paris late last week, Royal said it was wholly unfair of tax-privileged French pension schemes to "chase families of modest incomes and means away" through speculation in real estate.

"Pension funds would do better not to speculate but invest in companies to create jobs," she told supporters at a campaign event which Paris mayor Bertrand Delanoe also attended.

Royal said if elected president, she would maintain tax benefits for pension funds that invested to create jobs but remove them "on those investors which speculate in real estate".

However, French pension funds - of which there are not many - and pension-related investors like insurers are not big investors in the domestic property market. Experts say the exposure of these investors to French real estate is just 5% of assets, with much of this in Paris and much of it directly-held.

Indeed, much investment in French real estate, which has boomed since 2001, has come from pension funds elsewhere in Europe. One of the biggest is Dutch pension giant ABP, which has €2bn of its €210bn in assets allocated to that real estate market.

Jaap Maassen, director of pensions at ABP, said he could not fully understand why Royal was accusing pension funds of real estate speculation in France. "I don't quite know what she was referring to, but I think it's clear that pension funds like ABP are long-term investors. We're not in it for the quick win," he told IPE.

Maassen, who is also president of the European Federation for Retirement Provision, added a long-term oriented approach to investing was also true of French pension funds.

Elsewhere in French pensions, Royal is said to favour an increase of 5% in state pensions benefits for France's poorest, though she has not said how this would be paid for.

Sarkozy also backs an increase in state benefits for the poorest but has proposed cutting pensions for public sector employees to pay for it.


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