The French are worried about retirement. They fear, even excessively, that their standard of living will fall and, most of all, they dread having to work for a longer period. Yet, despite all that, they do not seem to be grasping the nettle and taking full advantage of the employee savings and employee retirement plans on offer. A barometer published in February 2021 by the “Savers’ Circle[1]” entitled “Savings and retirement for the French[2]” offers a few hints on how to understand this apparent paradox.

[1] Cercle des Epargnants

[2] “Les Français, l’épargne et la retraite”

Retirement : worry and uncertainty uppermost

78% of French people express concern about the retirement system. The demographic and financial imbalances that threaten how the system works at the moment, have not escaped them. On a personal level, the main concern, mentioned by over 80% of those questioned, is the lack of finance. Yet, this opinion is perhaps more tied up with a pessimistic view of how pension levels will evolve than negative feelings as to the real standard of living for retirees today. Indeed, three quarters of working people believe that retirees do not have enough money to live correctly, whereas only one retiree in three feels that he or she does not have enough money to live on. Thus, after being anxious throughout their working life, most retirees discover with amazement that things are not so bad after all. An error of judgement that probably comes from the difficulty in estimating the amount of one’s retire-ment pension. 65% of the working population do not know what they will earn in retirement. 77% of people find the calculation difficult. When in doubt, people fear the worst.

Are pension funds the solution?

As a counter to the threat that hangs over the retirement system, the people interviewed put the development of “pension funds” at the top of their action list. 53% in favour; 24% against. Raising contribution rates got a slightly lower score. On the other hand, raising re-tirement age or reducing pensions were both overwhelmingly rejected. French people would seem to be ready to build up capital for old age so as not to carry on working for longer. Yet, when it boils down to it, they do not rely very much on saving for retirement. If they do put money aside it is most of all “precautionary” savings. Only one in four say they hold a retirement savings product. What people mention as being a deterrent is the lack of product information and a refusal to tie up their savings with no possibility of making withdrawals if needed.

The benefits of a PER are little known

The survey goes further and takes a look at the PER , a new scheme that emerged with the recent “Pacte” law. Two thirds of those who have a retirement savings product (PERP, Art.83, Perco, Madelin, etc.) do not even know that these products are no longer available. A large majority of these people do not envisage transferring to the new scheme. The rea-sons given were: they hate complex formalities or else they do not know enough about the new savings product. It is without a doubt this lack of knowledge that is the biggest obsta-cle to the development of retirement savings. 83% of interviewees felt, in fact, that the pri-ority is to improve information to workers on employee savings schemes. 81% would like to see more clarification of the rules surrounding retirement savings.

In the end, the PER is the answer to most people’s expectations: early withdrawals made easier, more flexibility when taking a pension as an annuity or a lump-sum, much clearer product information. All this by bringing all available products into one scheme. Only one hiccup: the launch of PERs went totally unnoticed! There is a crying need for explanations and education. What if employers were the best placed to take charge of information to the workforce? This would be an opportunity to give employees some real help on an issue that preoccupies them more and more early on; but also to bring out what the company does in terms of supplementary social protection and employee savings. In any event, the study by the Savers’ Circle shows that the French are ready to listen. > Here is the link to the study (in French) https://www.cercledesepargnants.com/wp-content/uploads/2021/02/Barometre2021VFLes-Français-épargne-et-retraiteCercledesEpargnants-Diffusion.pdf

Damien Vieillard-Baron