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French reforms insufficient says Lazard’s Thomas

FRANCE - The current proposed reforms to France’s pay-as-you-go pension system will not be sufficient, says Jean-Pierre Thomas, managing director at Lazard Brothers in Paris.

Thomas is a former leading light of the push towards funded retirement provision in France

Speaking at the ‘Future of European Pensions’ conference at the Royal Institute of International Affairs in London today, Thomas commented that the current reforms would not be sufficient to meet what he calculated as a 15 billion euro annual shortfall in the pensions balance in France as a result of the costly repartition system.

“Projections that were made in terms of growth of growth and employment in France were too optimistic in my opinion,” he added.

Thomas noted that next week the French government would begin further discussion on amendments of the Epargne Salariale system of company-administered savings plans.

The first debate, he said, would concern extension of the existing 10-year arrangement into a more retirement-oriented 15-year plan. However Thomas also predicted that the govt would seek to introduce further individual retirement savings plans ahead of a new finance law to be introduced in October.

“This system will be very much like the Loi Thomas, although it may be based on either collective or individual savings with a tax incentive of some five percent deductible from income. My belief is that this will take the form of greater individual savings and this market could be open by the beginning of next year.”

Thomas has worked closely with the French government on the shape of these reforms.

Thomas’ views mirror those of the head of AXA’s asset management arm, who says the viability of France’s pension system is under threat.

“France’s pension system is faced with an unprecedented demographic shock that is threatening the viability of the system itself,” said Nicolas Moreau, chief executive of AXA Investment Managers in a newspaper article today.

“If cuts in future benefits are to be avoided, workers and pensioners will both have to adjust to this new reality by contributing a higher proportion of their income to fund both state and complementary pension schemes, and retiring later in order to increase the number of contribution years,” Moreau wrote in the Financial Times.

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