Rescuing Supplementary Pensions: French Supplementary Pension Schemes in Peril

The decidedly worrying situation of the old-age insurance scheme that forms part of French social security provision is well known. The balance of that scheme was upset when the baby-boomers reached retirement age and it has been in deficit since 2005. We were less well aware of the equally worrying state of the supplementary pension schemes for employees and executives (schemes known as AGIRC and ARRCO), to which the French Court of Auditors drew attention in late 2014 with their assessment that these were in an alarming state and required urgent action. Since the beginning of the 2009 crisis, these supplementary schemes have recorded increasing deficits and, in order to pay the pensions due, have had to draw on their reserves, which could run out before 2023 so far as AGIRC and ARRCO taken together are concerned, or by early 2018 in the case of AGIRC alone, if the Court of Auditors’ calculations are correct. As Jacques Bichot reminds us here, reforms have to be implemented as soon as possible, and these cannot be based on the same techniques as have been used over the last 30 years. The supplementary schemes now have to become more cost-effective and reactive in order to adapt rapidly, whenever necessary, to the vagaries of the economy. Jacques Bichot makes a number of recommendations along these lines: merging the different supplementary schemes, prior to these being merged with the basic pension scheme itself, and separating strategic from managerial responsibilities. He also specifies the tools that might be used to improve the management of pension schemes: changing the disbursement value of pension points, action on reference salaries and on the stock of points, the setting of a “pivot” age for the calculation of pensions, employing a coefficient of actuarial neutrality etc. These are proposals that are valid, as he sees it, for all schemes, both basic and supplementary. However, even if they are not to be applied across the board, they can be implemented right away in the supplementary schemes.