France’s pension system is made up of three pillars: the French state pension, compulsory occupational pensions (AGIRC and ARRCO), and voluntary occupational and personal arrangements, either defined contribution or defined benefit.
As we mentioned in our Asinta article in March 2018, the European Union (EU) directive of April 16, 2014 on improving the mobility of workers between member states, had to be transposed into French law and impacts defined benefit schemes. One of the directive’s provisions states that the benefit rights accumulated in a supplementary pension plan must be permanently vested in the employee after three years of membership. At the moment, an employee who leaves a company with one of these ‘random rights’ schemes loses all their accumulated pension right, which comes in full contradiction with the EU directive.
So finally, the French government has taken steps there. The French loi Pacte (voted in April 2019 but not enacted yet) states in article 65 that rights acquired should be maintained and a new legal framework for defined benefit be established. However, the law really announces the government will pass a decree within six months of law enactment detailing how the new system will work.
Two draft versions of the proposed decree already have been circulated and are under scrutiny from insurers, lawyers and brokers such as Gerep.
What comes out clearly is that:
- Current defined benefit schemes will have to be closed, in an orderly manner that preserved rights already acquired, with certain flexibility for companies
- New schemes have to be established with specific rules, such as
- A maximum of 3% of income can be acquired every year
- A maximum of 30% of income can be acquired overall
- Current tax rules remain unchanged
Gerep will be looking carefully into new developments there and expect the proposed decree to come out around September 2019.