APAPR European Pensions Conference 25 October 2011 Pierre BOLLON Director General

2 Takeaways from the French experience in DC Pension Schemes APAPR / EFRP – October 25th, A DC Pension Scheme in France : the PERCO 2.Takeaways 2

3 Pension system in France APAPR / EFRP – October 25th, 2011 France has still a strong PAYG system but its high replacement rates will decrease, as a consequence of successive pension laws (1993 / 2003 / 2010) Procees of retirement savings represent currently less than 5% of retirees ressources, clearly not enough to maintain living standards in the future In 2003, two new voluntary pension schemes were created by law: 1.the PERP (retail insurance contract / EET) 2.the PERCO (occupational / 401 K like / TEE) 3

4 PERCO : How does it work? APAPR / EFRP – October 25th, 2011 Professional scheme implemented at company level by collective agreements between employer and unions representatives Employees voluntary contributions can be matched by the company up to 300% and 5,600€ per year Each PERCO must offer an investment choice between at least 3 mutual funds; one option has to be a lifecycle investment fund. Employees and employers sit at fund boards Sums are available at retirement age (or earlier if used to purchase a main residence) At retirement age, beneficiaries receive their accumulated capital (free or programmed withdrawals) and can buy if they wish a life annuity 4

5 Figures about the PERCO APAPR / EFRP – October 25th, 2011 PERCOs are boosting: 5 B€ / + 35% in ,000 companies(+ 19% in 2010) provide Perco to 690,000 employees (+27% in 2010) Still a long way to go to get a sufficient coverage 5

6 New mesures to increase coverage APAPR / EFRP – October 25th, 2011 In 2008 and 2010, French Authorities adopted measures to improve funded occupational pension schemes coverage: Mandatory annual collective negociation on pension schemes PERCOs can now be designed with automatic enrollment (and opt out) Employers have to offer a Pension Scheme (collective insurance contract or Perco) to all employees if a DB scheme (usually insurance « top up ») is provided to management 6

7 Takeaways APAPR / EFRP – October 25th, 2011 The financial markets /sovereign debt crisis is bad news both for Funded schemes and for PAYG schemes Voluntary systems only develop if they do not force life annuity payouts. Flexibility, along with proper tax incentives, safety of design and sound asset management are of utmost importance Compulsory systems bring complete coverage and economies of scale but inevitably entail greater interferences by the State, (investment rules, … and are even sometimes unfortunately seen as a cheap source of financing its budget gap European regulators’ aim should be to foster the development of funded schemes and not add burdens (e.g. SII, FTT, mandatory guarantee, etc)on them Astazi, nu putem spune ca exista un sistem « cel mai bun », dar putem invata din experienta fiecaruia lucrand impreuna la nivel european. 7

8 APAPR / EFRP – October 25th,