Pension Funds in France: Still a Dead End?

The French Presidential elections of 2002 have exacerbated the debate on the future of the pension system. This debate started about 20 years ago, and has been marked by numerous reports, books, and contributions that have not been followed by any significant political decisions. Only one reform, the Balladur reform (named after the Conservative Prime Minister in place at that time, Edouard Balladur) was enacted in 1993. Surprisingly, the Balladur reform was inspired by the White Book issued in 1991 and ordered by Michel Rocard when he was the Prime Minister of a Socialist government. The first pillar of the pension system, i.e. the pay–as–you–go (PAYG) basic scheme, was the only concern of the Balladur reform. The other pillars, i.e. complementary PAYG or funded schemes, were not affected. In March 1997, Parliament enacted the Thomas Act (named after the Conservative deputy who wrote the proposal) that introduced retirement savings plan (Plans d’epargne retraite), but the law was never enforced because of the political change in June 1997 and was formally abrogated in 2002. Today there is still no consensus on pension funds in France. The only issue that seems not to be debatable is the willingness to maintain a PAYG public scheme for basic and complementary pension schemes. The debate concerns the introduction of pension funds as a third pillar. This paper shows that, even if pension funds hardly exist in France, they have close, but imperfect, substitutes such as life insurance and employee–saving schemes. The difficulty is that these saving instruments are not specifically designed for retirement purposes. There is thus a risk of insufficient savings for old age. We advocate the introduction of pension–oriented schemes, but not as designed by the Thomas Act, since this offers insufficient protection against financial risks for wage–earners. The first section of this paper is devoted to an institutional overview of the French pension system and presents some basic statistics. The second section gives some details on supplementary occupational–funded schemes. In section 3, we argue that funding does exist in France, through personal savings. In section 4 we show that the last reforms did not pave the way to pension funds. Section 5 concludes. The Geneva Papers on Risk and Insurance (2003) 28, 127–150. doi:10.1111/1468-0440.00214