Social partners sceptical over government Pension Reserve Fund bill

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In April 2001, the French government published a bill providing an independent legal status for the Pension Reserve Fund (FRR) - which provides support for the state pensions system through financial investments - and ushering in investment by the fund in stocks and shares. This bill has received far from unanimous support from the social partners.

The Pension Reserve Fund (Fonds de réserve des retraites, FRR), which is to receive funding to the tune of FRF 1,000 billion by 2020, was set up in 1999 (FR9812147F) to buttress the "pay-as-you-go" state pension system (whereby the contributions those currently in employment pay for the pensions of those currently in retirement). The FRR funds are invested in the financial markets and currently managed by the government. However, this scheme has been widely criticised, in particular in a report tabled by an opposition senator, Alain Vasselle, on 20 April 2001.

On 26 April 2001, the government tabled a bill on transforming the FRR - which is part of the Fund for Old Age Solidarity (Fonds de solidarité vieillesse, FSV) - into an independent public management body. The proposals go some way towards addressing the criticisms levelled at the scheme. The reformed body's mandate would be to oversee financial reserves until 2020. It would have a monitoring committee made up of members of parliament and representatives of the social partners and the government. A directorate composed of three people appointed for six-year terms would also be set up. The Deposit and Securities Fund (Caisse des Dépôts et Consignations, CDC) would be in charge of the administrative aspects of the fund's management. The bill says nothing about the financial management of the Fund, thus leaving the way clear for management focusing on higher-risk investment (in stocks and shares), and no longer solely on short-term government securities.

The bill does not address the misgivings expressed in the Vasselle report over the funding of the FRR. When the fund was set up, part of its revenue came from the "social solidarity" contribution levied on companies. The 2000 Social Security Funding Act (Loi de financement de la Sécurité Sociale, LFSS) contributed other revenue to the FRR, such as: the surplus from the general pensions scheme; part of the 2% tax levy on capital revenues; and contributions from the savings banks and the Deposit and Securities Fund. The 2001 Social Security Funding Act has broadened the revenue base further through allocating to the FRR the major share of the proceeds of the sale of mobile telephone licences and an unspecified amount of the FSV surplus. The FRR's revenue base has drawn criticism for being piecemeal and unstable.

The bill has not received unanimous support from the social partners. The board of the jointly-managed National Old Age Insurance Fund (Caisse nationale d'assurance vieillesse, CNAV), which administers the general pension scheme for employees, has given a generally negative opinion on the bill. The MEDEF employers' confederation is opposed to the very principle of the FRR fund. It would prefer a wide-ranging and forward-looking overhaul of the various pension systems. The CFDT trade union confederation's representatives on the CNAV voted for the bill, while CGT abstained and the remaining unions reserved their positions. The trade unions are not opposed to the principle of such a fund to support the pensions system, but their main reservations focus on the FRR's funding, organisation and management

The unions have criticised what they see as the risky and unstable nature of the FRR's revenue base - an issue which is not addressed in the bill. Several unions are pushing for an extension of the fund's revenue base. In terms of the organisation of the FRR, the unions have lamented the fact that the government is dominant, while the social partners have very little input. CFE-CGC is also disappointed that the social partners do not have a majority on the monitoring committee and that the government-appointed directorate has the authority to impose its decisions on the monitoring committee in the event of disagreement. CGT fears that the fund might not be used solely for pensions.

The trade unions are also critical of the uncertainty surrounding the FRR's investment choices. In terms of developing risk-based investment, the trade unions would prefer that profits are not the sole criterion, but that others, such as security, job creation and sustainable development should also be factored into the equation.

The social partners are hoping to use the forthcoming parliamentary debates to amend the government bill.