Asset allocation in pension plans in France. National Pension Fund Day, Milan May 15th, 2014

Transcription

1 Asset allocation in pension plans in France National Pension Fund Day, Milan May 15th, 2014

2 CTIP Association CTIP is the professional association of paritarian insurance institutions wich advocates in France for collective agreements in occupational insurance schemes and occupational pensions 47 members : not-for-profit insurers, co-owned and co-managed by labour unions and employer organisations (AG2R LA Mondiale, HUMANIS, MALAKOFF MEDERIC, PROBTP, ) Protecting employees against health expenses, income protection due to work injury or death, long term care and pensions 60 % of workforce covered and 1 million employees covered by pension plans French paritarian insurers are the leader of health group insurance in France with 24 bn premiums, ahead of insurance companies and mutuals Total invested assets : 130 bn CTIP is member of the AEIP, European Association for Paritarian Institutions of Social Protection, wich is very active in different social areas, i.e. health and pension policies at EU level. 2

3 Landscape of pensions in France (1/3) 1st pillar Mandatory system enforced by law (275 bn benefits) 2nd pillar Collective agreement system (6,4 bn benefits) 3rd pillar Individual plans State system (CNAV) + 2 paritarian schemes (AGIRC ARRCO) 37 Mo pensioneers 14,1 % of GDP DC plans(insurance) DB plans (insurance or sponsor support) Employees savings plans (asset managers -PERCO) DB/DC : 5 Mo employees PERCO : 1 Mo employees 0,3 % of GDP Life insurance contracts used as savings for retirement Personal pension product - (insurance contract - PERP) Life insurance : 26 Mo p. PERP : 3 Mo p. 3

4 Landscape of pensions in France (2/3) Occupational pensions schemes in France in 2013 (pillar 2) Total premiums Total Assets under management 10,5 bn 160 bn Life insurance accounted 1,465 bn of assets, a third is considered to be savings for retirement (around 500bn ) PILLAR 2 DC plans DB plans Full DC plans (PERCO) Represents 70 % of occupationnal pensions Represents 25 % of occupationnal pensions Represents 5 % of occupationnal pensions Ruled by insurance regulation 110bn of assets Ruled by insurance regulation or only sponsor support 42 bn of assets Asset managers regulation 8 bn of assets 4

5 Landscape of pensions in France (3/3) Who carries out occupational pensions plans in France? For-profit and not-for-profit insurance institutions (insurance companies, paritarian insurance institutions, mutuals) and asset managers (Perco) Mostly DC schemes, but still some DB plans Some full DC schemes where risk investments are taken by employees: unit linked insurance plans and employee savings plans (eg PERCO) French insurance institutions may choose between Insurance regulation or IORP regulation ( article 4 framework) for their occupationnal pension schemes With an obligation to ring fenced funds or to have a dedicated insurance firm acting as IORP Paritarian insurance institutions can be assimilated to IORPs as they are coowned by employers and employees and are not-for-profit 5

6 Asset allocation of pension plans in 2013 Pension asset allocation in 2013 Loans 0,2% Cash and Deposits Others 7,3% Property 3,3% Bonds 62,6% Equity 26,5% 6

7 Framework of portfolio regulation in France French pension market is regulated by insurance rules The prudent person principle is not applicable before implementation of solvency 2 in 2016 Solvency I is based on a quantitative portfolio regulation which gives simply a quantitative limit on holdings of a given asset class. Typically, instruments whose holdings is limited are those with high price volatility and/or low liquidity : No limit for bonds traded on regulated markets Maximum of 65% of shares (maximum applied to investments against technical provisions) Maximum of 40% in real estate Maximum of 10 % in loans Maximum of 10% in unquoted shares or alternative assets 7

8 Key messages Solvency rules give real incentives to government bonds, and bad incentives to equity, alternatives and non rated investments Share of corporate bonds is around 38% of total investments in bonds (in life insurance and pension) A strong need in the financing of alternative assets, infrastucture projects and long term investments Up to now investments in those classes had come mainly from bank industry For 2008, prudential regulation prevents bank industry to invest in instruments that have long-term profile (too risky) and are not traded on regulated markets Despite a real need for better return, the insurance industry faces the same issue regarding Solvency II To support long term growth is a critical challenge for States By introducing facilitations of regulation for insurance industry (e.g. to allow direct investments to not listed companies, to private equity, ) By softening the solvency regulation for Long Term Invesments work in progress at EU level by European Commission and EIOPA - 8