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How the system works

France's first pillar social security system is currently worth up to 50% of average salary, based on the best 15 years of employment.
Arrco, created in 1961, the first tier of the country's obligatory top- up pensions arrangements, stipulates that all French employees contribute 6% of their wages up to a ceiling of around Ffr170,000 (E25,916) a year.
Pensions are then calculated on a points basis, with the final value of a person's retirement income equalling the value of their contributions multiplied by points accumulated. Prior to January 1, 1999, the 50 Caisse de Retraites (CDRs) under the Arrco/Unirs (Union Nationale des Institutions de Retes Complémentaires - now integrated into Arrco) operated independent points calculations systems. These have now been reconfigured to give a unique point value for all, with one point equal to one euro valued against the franc. All Arrco pension payments are also now entirely centralised. Each CDR remains fully autonomous though in terms of investment decisions, and surplus invested assets average between six and nine months of liability payments. 90% of this investment must legally be placed in French securities, however.
Agirc, created in 1946, is the next tier of France's pension system, but applies solely to France's 'cadres' - middle and upper managers. Minimum contributions stand at 16% of salary up to a ceiling of Ffr120,00 a month, with half met by the employer.
Agirc operates a unified points arrangements within its 39 CDRs.
The Arrco and Agirc systems were designed to top up social security by 25%.
Present overall pension payments average around 64% of salary for French employees.
Both organisations are completely paritaires - that is, employees, employers and social partners are equally represented.
France's répartition system differs from the Anglo-Saxon 'pay-as-you-go' model, in that each employee is saving for himself, not contributing to another generation's pension income.
AFPEN RECOMMENDATIONS FOR PENSION FUND REFORM.
The French association for pension funds sets out its guidelines: q Provision of a life annuity with guarantees.
q A collective framework for all businesses.
q Shared decision making between social partners, businesses and employees.
q Segregation of assets and liabilities.
q Specific prudent investment rules.
q A fair and certified communications channel.
q Guaranteed asset management by professionals in the field.
q Independent expert advice.
q Mediation bodies.
q Implementation of an underwriting organisation.
q A professional pension fund association.
q A fiscally and socially favourable framework.

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