French ministries of Social Affairs and Finance have unveiled a new decree amending the financial management of French pension funds after the first version released in June 2016 was challenged by the interested parties.
It appears however that the second version, due to enter in force on 1 July 2017, is still contested by a number of pension funds.
This reform aims to bring a harmonised and stricter framework to the organisation of all French pension funds and their investments. The role of pension funds’ administration boards and third parties, the implementation of ethics rules, as well as clarity of investment rules, are targeted in particular.
The Caisse nationale d’assurance vieillesse des professions libérales (Cnavpl), gathering local pension funds of 10 liberal professions, has asked the postponing of the implementation of the new decree.
It stated that almost nothing has been changed in comparison with the first decree issued.
“Only a few amendments have been done while new constraints have been introduced and that without the consultation of pension funds,” said the Cnavpl chaired by Monique Durand.
It also pointed out that Ircantec, the complementary regime for contractual staff in the French public sector, has been taken out of the scope of the reform without any explication.
Last November, Vincent Delsart, chief investment officer at Caisse des Dépôts’ pensions division, explained to InvestmentEurope that Ircantec should not be in the scope of the reform since the governmental report on which the pension fund reform is based was positive towards its management, and because Ircantec’s own policy is already agreed by the French state.
Investments in equity and debt securities limited to 25%
According to the Cnavpl, the second version of the decree still assimilates pension funds to insurance life schemes and that is denying French pension funds’ particularities and their role in the financing of real economy.
Among others, the decree proposes to limit French pension funds’ investments in equity and debt securities (in direct line or through fund selection) to 25% of their portfolios. In order to rise their allocation to capital securities, they will have to invest in mutual funds and if they do, they will need to partner with at least another pension fund and a third-party investor.
The Cnavpl assessed that a number of amendments issued in the new decree will prevent pension funds from managing and covering their risks and would threaten the concerned funds’ reserves amounting to around €50bn.
The following pension funds are entering into the scope of the new decree issued : Caisses Nationales des Médecins, Dentistes et Sages-femmes, Vétérinaires, Pharmaciens, Kinésithérapeutes, Infirmiers et Auxiliaires médicaux, Agents d’assurance, Notaires, Officiers ministériels, Experts comptables, Architectes et Conseils, Caisse du Barreau (CNBF), RSI, Caisse de Retraite du Personnel Navigant (CRPN), Caisse de Retraite des Clercs et employés de Notaires (CRPCEN ), Ircec (artists, authors) and Caisse centrale de la Mutualité sociale agricole (MSA).