PARIS - The French Parliament is expected to consider yet another draft pension bill, possibly this fall, but some experts offer little hope of legislation passing any time soon.
Yet, there is a mounting consensus that France's long-established pay-as-you-go systems will not be able to survive in their current form.
A new government agency projection that the social security deficit for 1996 will be triple the previously estimated level will delay consideration of private pension reform until at least next year, said Brigitte Brugirard, directeur general of Societe de Prospective, Actuariat et Conseil, a Paris-based benefits consulting firm.
The projected 48.6 billion French franc ($9.3 billion) deficit means the government will be pressed even harder to meet the Maastricht Treaty's criterion that government deficit not exceed 3% of gross domestic product in 1997 to qualify for European monetary union. That means it will be tougher for the government to add tax privileges for private pension funds, Ms. Brugirard said.
Meanwhile, the Parliament this spring failed to adopt expansion of company savings plans, she noted. The government had sought to double the ceiling for maximum contributions to these fonds commun de placement d'enterprise plans as long as assets were kept until retirement; now, participants only need to leave contributions in for five years.
Objections by French legislators seeking to adopt a different form of retirement vehicle blocked the proposal's advancement, Ms. Brugirard said.
But many French experts still are attached to their state pay-as-you-go system. Advance-funded pension funds created in the 1920s and '30s were later ravaged by inflation and war, leading many of the French to believe a pay-as-you-go system provides better retirement income security for individuals.
In addition, many French experts speak highly of the "solidarity" between generations that is created by the redistributive nature of pay-as-you-go systems.
However, the writing for pay-as-you-go systems may be on the wall. In France, projections indicate there will be an equal number of retirees and active employees to support them by 2020.
The message is starting to hit home. In late April, France's two compulsory retirement systems for managers and workers said benefits will be reduced about 20% during the next 15 years.
Contribution rates for lower-paid participants in both plans also were set at similar levels, while benefits will be harmonized in 1999, paving the way for the eventual merger of the two systems, known as AGIRC and ARRCO.
These moves are causing French companies "to realize the extent of the problem," and to start considering creating their own plans, Ms. Brugirard said.
Trying to spark moves toward a funded system in France and across the rest of the Continent, groups such as the Association Europe et Enterprise are promoting an agenda that would lead to adoption of funded retirement vehicles.
The Paris-based group was created in 1989 to improve competitiveness of European companies and lobby on their behalf to governments throughout Europe. The association is chaired by Loik le Floch-Prigent, chairman of the Societe Nationale des Chemins de Fer Francais, France's troubled railway system, and previously head of Gaz de France, Societe Nationale Elf Aquitane and Rhone-Poulenc.
One of the association's preoccupations is pension reform, given the declining state of social security systems across Europe, the rise in unemployment rates and the need to build up domestic sources of institutional capital.
At a recent conference, Bruno Gabellierei, head of the social security and pension funds working group, called for development of European pension funds, including the following proposals:
Unrestricted transferability of pension rights and reserves throughout the European Union;
Creation of collective, voluntary pooled vehicles geared for small and midsized businesses;
Tax advantages for pension contributions;
Equal representation of employers, employees and retirees over external pension fund management;
Application of the EU's Third Life Directive to pension fund investments, in the absence of a separate pension fund directive;
Free choice of money management services; and
Mandatory provision of insolvency insurance.
But other panelists questioned such a broad agenda. "Most of the proposals are wonderful but perhaps too wonderful" to adopt in the near future, said Adelheid Sailer-Schuster, an aide to EU Internal Market Commissioner Mario Monti.
Alan Broxson, chairman of the European Federation for Retirement Provision, noted there already is a commission proposal to require portability of pension rights but it would force Germany to surrender its eight- to 10-year vesting requirements and threatens tax regimes.
In addition, Jane Platt, chief operating officer of BZW Asset Management Ltd., London, said the Third Life Directive's investment restrictions would be inappropriate for pension funds. Some countries wanted to clone the requirement that 80% of assets be invested in the domestic currency into a separate pension fund rule - a major factor in the decision to withdraw the proposal last year.