PPSEVs taking root
Almost a third of companies surveyed for the first ‘Baromètre annuel de la gestion de l’épargne salariale’, the annual survey measuring the new savings’ plans in France, are now considering setting up the new 10-year retirement savings scheme, Plan Partenarial d’Epargne Salariale Volontaire (PPSEV), though the idea of using the PPSEV scheme as a complement to existing retirement savings’ schemes is not yet a priority. This finding suggests that companies are keen to respond to the expectations of their employees to have their investment periods extended from the legal minimum of five years and is very promising since the law has only been passed earlier this year.
The survey represents 49.5% of the stock market capitalisation of the CAC 40 and is the result of a joint research project between Hewitt Associates in Paris, Interpargne, the Paris-based Epargne Salariale specialist subsidiary of Natexis Banques Populaires, and JP Morgan Fleming Asset Management.
Overall, almost half the companies questioned admitted that the wider Epargne Salariale reforms were leading them too rethink their savings schemes in one way or another.
Laurent Fabius’s proposed legislation surrounding the reforms was approved by parliament in February and is intended to stimulate the development of an overall attractive remuneration package, designed to give participants strong financial savings’ plans and the opportunity to become shareholders in their workplace, an area where, according to the report, there has been definite growth.
Priority or not, the report does however note that one in four companies already has projects in place to establish PPSEVs alongside their existing retirement provision, profiling the use of the Epargne Salariale as a pension plan à la française, whilst one in three would like to openly label the PPSEVs as a retirement provision tool.
Investment levels in the Epargne Salariale, at FFr 374bn (€54bn), still have some way to go before they match those of the established Epargne-Vie, which at present represent some FFr 5,000bn, despite the French government’s attempts to stimulate interest, particularly in the PPSEVs, by way of considerable tax and social incentives. An investment provision of 25% of employers contributions has been offered to companies who take the plunge, rising to 50 % where the contribution includes share option schemes, allowing employees access to their company’s capital.
The new reforms also mean that workers will be able to transfer their savings from one scheme to another, without being penalised, when they change job.
Another interesting feature is that three out of 10 companies already view the PPESVs as a retirement plan, and not a new form of Plan d’Epargne Entreprise (PEE), since their long term maturity means they can be particularly beneficial to those workers who are disadvantaged under the existing system.
The report believes that last year’s legislation will help the Epargne Salariale market to develop apace, especially if linked to other reforms to ensure quality of service and identify companies’ needs alongside workers’ expectations.
PEEs remain the most common from of Epargne Salariale, according to the report, with 94% of those companies surveyed having already set one up. Establishing a PEE, not convincing workers to participate in one, is the most difficult task, since the majority of companies complain of a lack of information regarding the possibilities of widening their choice of investment strategy.
French companies, the report notes, respond well to the needs of employees trying to build up individual savings’ plans, but don’t help those who want to invest and manage large chunks of money. Widening the scope of investment opportunities would help employees manage their capital on a long term basis, whilst companies would also benefit from the attractive tax incentives that come with the PEEs.
Employee share ownership is an important facet of the Epargne Salariale reforms and as such the report states that half of the participating companies supported the development of workers’ share options schemes. In France, 1.2m workers now hold company shares to the value of FFr 200bn.
One important feature of the Epargne Salariale is the expected growth in employers’ related contribution to the employees’ savings plans and the way companies intend to integrate this into salary proposals. In this respect, the report shows that 34% of respondents had already done so and that the number of positive answers overall to this question was high at 45%.
However, employers rarely contribute to the fullest limit, indeed 28% give just the minimum required, and it will be interesting to see whether, this time next year, the hike in the maximum contribution level, as stipulated in the reforms, will have had an impact on the amount that employers contribute.
The report believes that the responses to the survey indicate a clear step forward in educating employees about the managing their long term assets, whilst companies, like asset management institutions, will need to adapt to the changes that the Epargne Salariale will bring about in terms of education and communication.