The government’s PACTE law could transform the pensions landscape

Key points

  • The PACTE law paves the way for the creation of new funded workplace and personal retirement savings vehicles from October
  • There are questions about the future of reserves constituted by some of the schemes in the mandatory pay-as-you-go system, given reform plans
  • The PACTE law implements the EU’s IORP II directive in France

In less than a decade, the pensions landscape in France could look significantly different. This depends on the fate of two reforms, however. One, targeting the weighty mandatory pay-as-you go system, is still in a preparatory phase, while the other, concerning voluntary retirement savings, has mostly been wrapped up from a legislative point of view.

The PACTE law, which represents the government’s “action plan for business growth and transformation”, has been presented as ‘a big bang’ for retirement savings in France.

According to Indefi, a Paris-based asset-management consultancy, the law contains the ingredients for radical change of the country’s savings markets.

“Its repercussions should manifest themselves in the institutional sphere, with the gradual growth of what could be akin to a second pensions pillar, as well as in the distribution space, by challenging the monolithic status of life insurance,” it wrote in July.

In France, regulated pension arrangements have been the poor relation to insurance-based ‘assurance vie’ contracts and regulated bank savings accounts. 

According to the government, the latter two accounted for €1.7trn and €400bn in assets, respectively, versus €230bn in retirement savings. It wants retirement savings to reach €300bn by 2022.  

The PACTE law was passed by the National Assembly, France’s main legislative body, in April, and came into force in May. In July, the government published a keenly anticipated ordinance that fills in details of the retirement savings reform that was outlined in the law. 

L’épargne retraite, as pension saving 0outside the largely unfunded compulsory system is known, comprises a variety of vehicles with different audiences and other characteristics and limited transferability between them. They are also not provider agnostic: the insurance and asset management sectors have their own products and vehicles. 

IORP II makes it to France 

The PACTE law has transposed IORP II, the revised EU pension fund directive, in France, a country traditionally without pension funds. 

In 2016, legislation was adopted that introduced a new type of vehicle – fonds de retraite professionelle supplémentaire (FRPS) – subject to a framework compliant with what was then still the original IORP directive. 

Three insurance-based entities – Aviva France, Malakoff-Médéric, and Sacra – have since either created an FRPS or announced their intention to do so. 

The announcements have all been made since autumn last year. 

According to Aviva’s statement in November, Aviva Retraite Professionelle – as it named its FRPS – would initially be a €4bn fund, while the chairman of Sacra told IPE its FRPS would have an investment portfolio of about €3bn. 

Willis Towers Watson has said that because the IORP II governance and disclosure requirements are largely modelled on Solvency II, “we expect any FRPS vehicles emerging from an insurer’s retirement business to be mostly compliant with the IORP requirements although some modest changes may be required”.

The new legal framework aims to make the system more attractive by increasing standardisation, simplification and flexibility. 

It introduces a new wrapper, the Plan d’Eparge Retraite (PER), which can accommodate three types of plan. Two of these are for employers, although companies will have the option to combine these products into a single retirement savings plan, and the other is for individuals.

Key common features include the possibility of early withdrawal for the purpose of buying a primary residence and a choice of an annuity or a lump sum or a combination for those sums accrued via voluntary payments or employee savings. Assets would be invested on the basis of lifecycle management.  

Another important aspect is that the new framework breaks the link between certain types of plans and providers, stimulating competition between asset managers and insurers. 

AFG, the asset management association, said the reform was “largely inspired by the success of the Perco”, the funded workplace pension vehicle introduced in 2003.


The new plans will be marketable from October 2019. The sale of the old generation of products will cease from October 2020, although contributions to any that are already operational will remain possible. 

If the PACTE law is, as the consultancy Indefi puts it, “act one for the pensions big bang” in France, then the second act is the overhaul of the complex mandatory and largely unfunded public system. 

In July, after 18 months of consultations, Jean-Paul Delevoye, the government’s high commissioner for pension reform, presented his recommendations. 

The thrust of the reform is to replace the myriad existing schemes with a universal retirement system in which individuals would accrue pension rights in the form of points, according to the same formula, regardless of their profession. 

Some of the key recommendations in Delevoye’s report are for France’s so-called ‘special’ regimes – arrangements for public sector employees of the state railway operator SNCF or the Paris metro company RATP, for example – to be closed.

The minimum retirement age would remain at 62, but according to Delevoye, the full pension would only be accessible from 64. It would evolve with life expectancy. 

Delevoye’s plan foresees creating a national pension benefits office, or fund. From 2020 to 2025, this entity would implement a transition leading to the integration of Cnav, the old-age social security regime for salaried employees, Agirc-Arrco, the newly merged complementary schemes for the private sector, Cnavpl, the fund for the so-called liberal professions, and Ircantec, the scheme for non-tenured public servants. The merger would be completed in 2030 with the creation of local offices or institutions. 

It has also been noted that the proposed reform would imply the disappearance of ERAFP, a rare example of a French pension fund, as its function would be subsumed under the new universal system.

Although France’s mandatory pension system is largely unfunded, there are still large pots of money at stake, with some of the schemes having constituted reserves totalling some €130bn. There are fears of these being plundered as part of the reform.

According to an account of Delevoye’s proposals by the mutual pension provider UMR, the commissioner has proposed the creation of a universal reserve fund with a portion of the reserves in the current system. Reserves that would not be required to cover commitments transferred to the new system could be used at the discretion of the plans that hold them, perhaps to pre-fund a supplementary plan or finance social projects. 

Delevoye immediately embarked on a fresh round of negotiations with the social partners after presenting his report, but strikes have been called for September. At the time of writing the government was expected to present a reform bill in the autumn, and for parliament to debate it only after municipal elections in March. 

Delevoye is said to have indicated it could take 15 or 20 years to complete the integration of the different schemes into the new system.