Regulation of state and supplementary pension schemes in France: overview

A Q&A guide to pensions law in France.

The Q&A gives a high level overview of the key practical issues including: state pensions; supplementary pensions; funding and solvency requirements; tax on pensions; business transfers; participation in pension schemes; and employer insolvency and overall scheme solvency.

To compare answers across multiple jurisdictions, visit the Pensions: Country Q&A tool.

The Q&A is part of the global guide to pensions law. For a full list of jurisdictional Q&As visit

Joël Grangé, Flichy Grangé Avocats


State pensions

1. Do employers and/or employees make pension contributions to the government in your jurisdiction?

Contributions paid to the government

The old-age pension fund for salaried employees guarantees insured employees a retirement pension. It is administered by both the:

  • French national old-age pension fund for salaried employees (Caisse nationale d' assurance vieillesse des travailleurs salariés).

  • Regional health insurance agencies (caisses d'assurance retraite et de la santé au travail).

Both employers and employees must make general social security contributions, calculated on the basis of the employee's salary and any related sums. Insured employees, who have paid contributions for at least one quarter, can generally request pension benefits above a certain age.

The Pension Reform Act of 9 November 2010 provides that the retirement age will gradually be raised from 60 to 62, depending on the date of birth. The Pension Reform Act also provides that the age above which the employee is entitled to a full-rate pension (notwithstanding the length of work) will be gradually raised from 65 to 67. Subsequently, provisions regarding retirement (whether at the employee's or at the employer's initiative) have been amended accordingly. The Act aiming at "preserving the future and fairness of the pension scheme", dated 20 January 2014, provides for a gradual increase of the length of career needed to receive a full-rate pension. In particular, employees born after 1973 will have to fulfil 43 years of employment to retire with a full-rate pension.

Employees who face particularly difficult conditions during their career or who have worked since they were very young may, however, be entitled to pension benefit at a younger age under the Pension Reform Act.

By Ministerial Order dated 2 July 2012, the government lowered the national retirement age for employees who have started working at a young age (that is, before reaching 20 years of age) and who have paid a specified number of quarterly pension contributions depending on their date of birth.

For the purpose of assessing the number of quarterly contributions necessary to receive a full pension, the Ministerial Order dated 2 July 2012 introduced the possibility for any worker to benefit from up to two additional quarterly pension contributions in the case of unemployment or maternity during his/her career. Periods of unemployment and maternity were already taken into account to a certain extent for the calculation of the number of quarterly pension contributions required by the law before.

However, the Act of 20 January 2014 introduced a new "difficult working conditions account" (compte pénibilité), which allows employees with difficult working conditions (such as employees exposed to noise, vibrations, manual handling of heavy objects, doing night shifts, and so on) to receive points depending of the time and level of exposure, and who will then be able to use these points to:

  • Pay for a vocational training programme allowing access to a less tiring job.

  • Reduce their working time.

  • Buy rights equivalent to a period of time of employment (quarterly contributions) and therefore retire before the normal age of retirement (up to two years before the normal age of retirement of the employee).

This account partially came into force on 1 January 2015 (for a limited number of working conditions identified as difficult, notably night shifts) and entered fully into force on 1 July 2016.

In addition, all employees covered by the general social security scheme must be affiliated to a complementary pension plan (Article L.921-1, Social Security Code). There are two complementary schemes:

  • The ARRCO scheme (Association pour le régime de retraite complémentaire des salariés). This was created through a collective agreement dated 8 December 1961. It applies to non-executive employees, and those of similar status, for the portion of their remuneration that does not exceed three times the social security ceiling (EUR115,848 for 2016).

  • The AGIRC scheme (Association générale des institutions de retraites des cadres). This was created through a collective agreement dated 14 March 1947. It applies to executives and employees of a similar status for the portion of their remuneration that ranges between the social security ceiling (EUR38,616 for 2016) and eight times the social security ceiling (EUR308,928 for 2016).

Under these complementary schemes, annual contributions collected from employees and employers are immediately redistributed to current pensioners, rather than invested. Both the employer and the employee must contribute to the schemes.

Both complementary schemes have been amended to reflect the changes resulting from the Pension Reform Act of 9 November 2010.

Taxation of contributions

The employees' contributions to the pension funds are exempt from income tax. The employer's contributions are exempt from corporation tax if they are considered to be justified expenses of the company. Both the employer and the employee are exempt from social security contributions for amounts within specific limits of the social security ceiling.

Monthly amount of the government pension

The old-age pension fund provides a pension of half of an employee's average salary, with a cap of half of the monthly social security ceiling (EUR1,609 for 2016).


Supplementary pensions

2. Is it common (or compulsory) for employers to provide access, or contribute, to supplementary pension schemes for their employees? If they do, are they:
  • Occupational (that is, linked to an employment or professional relationship between the plan member and the entity that establishes the plan)?

  • Personal (that is, not linked to an employment relationship, established and administered directly by a pension fund or a financial institution acting as pension provider, where individuals independently purchase and select material aspects of the arrangements, though the employer may make contributions)?

The employer can improve the benefits that are available to employees by making contributions to additional optional retirement schemes.

The employer can also set up an occupational scheme, either for the entire workforce, or for one or more objectively defined categories of employees (for example, managers or workmen (ouvriers)). Different types of occupational plans are available.

The employer can also choose to set up a collective retirement savings plan designed to allow the workforce to build up savings. The employee will be able to choose to receive them as a pension or a lump sum when he/she retires. These plans must cover the entire workforce.

Employees can enter into personal pension schemes (such as life insurance (plan épargne retraite populaire) (PERP)) which are not linked to their contract of employment. Although the employer is not a party to the scheme and has no obligation towards it, he/she can make contributions to these schemes.

3. Where supplementary schemes are provided, do these schemes provide pensions, the value of which:
  • Is linked to the employee's salary (salary benefit)?

  • Is linked to employer and/or employee contributions and investment return on those contributions (defined contribution)?

Supplementary pension schemes are either defined contributions pension schemes (the employer commits to pay each month a defined contribution to the pension scheme) or defined benefits pension schemes (the employer commits to the size of the employee's pension following retirement).

Supplementary pension schemes are contract-based and are in most cases managed by an independent body such as an insurance or contingency firm or a mutual fund (which levy management fees on contributions).

Depending on the type of arrangement subscribed, the enrolment to the scheme may be rendered mandatory for the employees.

There are no regulatory minimum of contributions to the schemes but there are, for some of them (for example, PERCO (plan d'épargne pour la retraite collectif) or defined contributions plans), statutory caps for tax deduction purposes.

Linked to the employee's salary

In a defined contributions plan, the employer (alone or after negotiations with the employees' representatives), defines the level of contributions applicable to all or part of the employee's salary (commonly expressed as a percentage of the remuneration).

Linked to employer and/or employee contributions

In a defined benefits plan, the employer defines the level of pension the employee will draw. If funds are missing, the employer may have to top up its financing. The employer can choose to pay by regular instalments or an exceptional one-off payment (depending on whether he/she wants to entirely or partially, instantly or progressively fund the scheme).

4. For supplementary pensions:
  • Is there a minimum period of service before workers are entitled to receive vested rights?

  • Are there any legal requirements for schemes or providers to index pensions in payment and/or revalue pension rights in deferment?

Minimum period of service

Retirement savings plans may provide for a minimum period of service (of a maximum of three months for PERCO (plan d'épargne pour la retraite collectif)) with the company before acquiring any entitlement. Defined benefits schemes generally require that the employee be employed by the employer at the time he/she retires to draw the pension.

Legal requirement to index

In a defined contributions plan, the employer only commits to the amount or level of contributions paid. He/she does not have to provide a guarantee in respect of how well the scheme will be managed financially. When the employee leaves the scheme, he/she will receive a pension from the insurance company. The policies normally include an upgrading clause, generally linked to the plan's financial health.

In a defined benefits plan, the employer commits to the size of the pension. As a rule, the insurance company will offer arrangements for upgrading the benefits.


Funding and solvency requirements

5. In relation to supplementary schemes, are these generally funded or unfunded? If funded, are there any solvency requirements on the sponsoring employer or provider?

Funded or unfunded?

In defined contributions plans, the scheme is funded by regular instalments and therefore it is implied that the employer is able to fund the instalment (or part of it) at the time of payment.

Defined benefits plans are generally funded, although the funds paid into the plan by the employer may later become insufficient and require a complementary payment from him/her. In both cases, funds are managed by external institutions.

Solvency requirements for funded schemes

Insurance companies and mutual funds managing supplementary pension schemes must justify of a "solvency" margin defined by ministerial order and assessed against the value of their own equity. Directive 2009/138/EC on the taking-up and pursuit of the business of insurance and reinsurance, which was transposed into national law by a Ministerial Order dated 7 May 2015, intends to establish a new control system based on quantitative and qualitative aspects. The controlling body (l'Autorité de contrôle prudentiel) can ask the insurance company or mutual fund to submit a recovery plan within one month in instances where they do not meet the solvency margin.

Insurance companies and mutual funds must also join in a joint guarantee fund which guarantees the rights of the beneficiary.

Companies or funds are subject to various investment requirements and limits as regards the investment of the scheme assets. For example, for PERCO retirement saving plans, since 1 April 2012, the company or funds in charge of the management of the plan must ensure that, at the latest two years before the end date of the plan, at least half the funds are invested in limited risk financial instruments.

6. In relation to access for members to the funds in their supplementary pension scheme:
  • To what extent can members transfer their funds to another pension scheme?

  • How do members normally take the benefit of their funds (for example, lump sums, income withdrawals (drawdown), life annuity arrangements)?

  • What are the legal restrictions upon access to the funds (for example, age)?

  • What are the common arrangements for early retirement and ill-health retirement?

  • Are dependants of deceased members entitled to receive benefits payable on the member's death? What form do these commonly take?

Member's transfer of funds

Where there is a change of employer, this may affect future pension rights under company schemes.

In a defined benefits plan, an employee who changes employer will lose the benefit of the plan.

In a defined contributions plan, pension rights are definitively acquired, even where the employee leaves the company. That entitlement is deemed transferable: where the new employer also offers a defined contributions plan, the employee can transfer rights over to the new employer's plan.

Similarly, for a collective retirement savings plan, the entitlement is definitively acquired, and the employees can transfer their acquired rights over to a new employer's plan (provided that the new employer has such a plan).

Taking pension benefits

For a defined contributions plan, the payment of the contributions, as well as the incomes generated by their financial investment, contribute to build up a capital which will be settled by annual, quarterly or monthly allowances depending on the arrangement agreed on.

The amount paid to the employee notably depends on the life expectancy of the employee when he/she draws his/her pension and on the financial efficiency of the scheme.

For a defined benefits plan, the payment of the rights is settled by annual, quarterly or monthly allowances depending on the arrangement agreed on. Beforehand, the personal capital is extracted from the collective fund and paid into a separate fund, which will be in charge of the service of the pension.

For a collective retirement savings plan, the settlement of the pension will generally take the form of annual, quarterly or monthly allowances. However, in some specific cases, the employee can ask for a lump sum payment.

Legal restrictions

Generally, the employee will be in a position to liquidate any right he/she may have acquired under a company supplementary pension scheme only after having drawn the state pension. It is a condition to benefit from the favourable tax regime (on social security contributions).

Defined benefits schemes generally require that the employee be employed by the employer at the time he/she retires to draw the pension.

For collective retirement savings plans, employees will liquidate their entitlement on retiring.

Early and ill-health retirement

Defined contributions and benefits plans generally do not allow early payment in the case of early retirement or ill-health retirement. Additionally, to benefit from the social security contributions exemption attached to company retirement schemes, the assets must remain frozen until the employee draws his/her state pension.

For retirement savings plans, the Social Security Code provides for limited cases where early payment of the employee's rights can be made, but early retirement and ill-health retirement are not one of them. However, the invalidity of the employee, regardless of retirement, is one of the cases where early payment (lump sum payment) will be allowed.

Dependant's benefits

In a defined contributions plan, in the case of the death of the employee before retirement, many schemes provide for the payment of the employee's accrued rights to the deceased's beneficiaries or spouse, often by way of a lump sum payment.

Regulation on collective retirement savings plans also provides for an early payment (lump sum payment) in the case of the death of the employee.

7. Is there a regulatory body that oversees the operation of supplementary pension schemes? Do any other governance regimes apply to supplementary pension schemes?

Regulatory body

There is no regulatory body that oversees the operation of supplementary pension schemes.

However, the independent body in charge of the collection of the social security contributions (Unions de Recouvrement des Cotisations de Sécurité Sociale et d'Allocations Familiales) (URSSAF) also monitors the compliance of occupational pension schemes and collective retirement savings plans with the Social Security Code requirements for social security contribution exemptions. Collection inspectors regularly audit companies to check whether supplementary pension arrangements that may generate exemptions meet the requirements set out by law.

Supplementary pension schemes are managed externally by insurance companies or mutual insurance companies, which are themselves controlled by specific regulatory bodies (such as the Prudential Supervision Authority (Autorité de contrôle prudentiel)).

Regulatory framework

The main provisions applicable to supplementary pension schemes are set out in the Social Security Code. Within this framework, supplementary pension schemes are defined at the group or company level, based on an insurance contract with an external institution (insurance or contingency firm, or mutual fund). Defined benefits pension schemes created before 31 December 2009 can also be managed internally.

Other key governance requirements

Apart from the legal requirement set out in the Social Security Code, supplementary pension schemes can be established by way of collective bargaining agreements, which are binding on the employer and the employee.

Penalties for non-compliance

In the case of non-compliance of the scheme with legal requirements, the employer can lose the right to social security contributions exemptions for the payments made into the schemes.


Tax on pensions

8. Are any tax reliefs available on contributions to supplementary pension schemes (by the employer and employees)?

Tax relief on employer contributions

In relation to supplementary pension schemes, a fraction of the employer's pension contributions is excluded from the tax base of corporation tax, subject to some conditions. The employer's contribution is also excluded from the tax base of social security contributions for each insured employee, on various conditions, and notably that the scheme is applicable to all employees (or to an objectively defined category of employees) and that it is compulsory (employees cannot refuse it).

This fraction cannot exceed the higher of:

  • 5% of the annual social security ceiling (EUR1,930.80 for 2016).

  • 5% of the relevant employee's remuneration subject to social security contributions, up to five times the social security ceiling (EUR9,654 for 2016), after deduction of the employer's contributions to the ARRCO and AGIRC complementary pension schemes (see Question 1, Contributions paid to the government).

However, these tax reliefs do not apply to optional defined benefits schemes for senior executives, which are subject to specific contributions, depending on the scheme.

Tax relief on employee contributions

The contributions paid to a compulsory supplementary pension scheme in which the employee is affiliated are deductible from the taxable income within 8% of the annual gross remuneration (caped at eight times the annual amount of the social security ceiling, that is, EUR308,928 for 2016). This limit is diminished by the equivalent of the amount paid by the company or the employee in a collective retirement savings plan (PERCO).

9. Are there any approval or registration requirements with the local tax authority where a supplementary scheme is established?

There is no approval or registration requirement with local or national tax authority on establishment of a supplementary pension scheme.

10. What is the tax treatment of investments made by the scheme?

The tax treatment follows the tax regime of the type of investment made by the scheme.

11. What is the tax treatment of pension and lump sum payments made to members?

Supplementary pension schemes (either defined benefits schemes or defined contributions schemes) settled by annual, quarterly or monthly allowances are taxable income for the beneficiary member. The periodic allowances benefit from a 10% standard abatement limited to EUR3,711 per year.

Collective retirement savings plan allowances are also subject to income tax.

12. Are there any other applicable tax charges on schemes?

The employees' and employers' contributions are both subject to specific contributions called "CSG" and "CRDS".

The employer's contribution is subject to a further contribution (forfait social) for the part exempt from social security contributions if the particular scheme complies with the conditions set out for the social security contributions exemption. The rate of the forfait social is of 20%, diminished in certain circumstances to 16% for payment in a collective retirement savings plan (PERCO).

13. Is there any legal protection of employees' pension rights on a business transfer?

Automatic transfer of pension rights

In relation to the basic state pension scheme, the employees' pension rights are not affected by a business transfer.

In relation to compulsory complementary schemes (AGIRC and ARRCO), a business transfer may imply that another fund is competent after the transfer (depending notably on the recipient company's activity). However, the operation generally has no impact on the employees' pension rights (although the employees' contributions may be amended).

In relation to supplementary pension schemes, no business transfer can cause the employee to lose his/her pension rights (either already acquired or currently being acquired) (Article L.913-2, Social Security Code).

Other protection for pension rights

There are no other forms of protection for pension rights.

14. Can the following participate in a pension scheme established by a parent company in your jurisdiction:
  • Employees who are working abroad?

  • Employees of a foreign subsidiary company?

Employees working abroad

Employees who are working abroad can participate in optional company pension schemes if the scope of the scheme includes them. In principle, there can be no tax relief for these employees except if the employee is still subject to French social security contribution law (in the case of secondment).

Employees of a foreign subsidiary company

Employees of a French company's foreign subsidiary usually cannot contribute to a French company's pension scheme.


Employer insolvency and overall scheme solvency

15. Is there any protection provided for pension scheme benefits where the sponsoring employer becomes insolvent? If so, who provides the protection, and how does this operate? If the scheme itself is underfunded, are there any funding obligations on connected or associated legal entities?

In relation to the basic state pension scheme or compulsory complementary schemes (AGIRC and ARRCO), the employees' pension rights are not affected by their employer's insolvency, as they are externally run.

As regards the scheme insolvency, see Question 5.


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Contributor profile

Joël Grangé, Partner

Flichy Grangé Avocats

T +33 1 56 62 30 00
F +33 1 56 62 30 01

Professional qualifications. Paris Bar, 1987

Areas of practice. Employment law (mergers, restructuring, collective litigation, collective bargaining agreements).

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