07 March 2013

IPE: The UMR's failed cross-border plans

Some in the industry have been highly critical of the Autorité de Contrôle des Assurances et des Mutuelles' (ACAM) alleged move to prevent the pension scheme from launching a cross-border fund. Others have denounced the "despicable" protectionist measures, arguing that the letter in question is yet another attempt by France to keep hold of its companies and wealth. One incredulous expert even asked how France could "violate" the EU's principle of free establishment with such "total impunity".

Cref's [local pension fund covering  complementary pensions for civil servants] former members would have taken a dim view of the UMR's relocation, but the current funding of Corem [pensions vehicle] could be an even greater concern for them. Last year, a national association representing civil servants saving for their pensions, known as ARCAF, demanded that the UMR explain a €734m funding shortfall at Corem at the end of 2011, and expressed concerns over a similar scenario at Cref.

UMR is then faced with a dilemma. Should it leave the country in the hope of putting in place a more flexible funding scenario, despite the risk of unsettling contributors who have seen pension rights cut sharply in the past? Or should it remain in the country to allay both them and the regulator, despite the fact it might forego the chance of distributing larger pensions?

The choice is a difficult one. But it is safe to say that if UMR finds itself unable to meet its pension obligations, its contributors and its regulator will be plenty unsettled. Perhaps the crux of the issue lies in the fact that both seem to question the UMR's ability to meet its promises. The answer, therefore, might be to try to restore a degree of trust – not in the pension fund but in the state of France.

Full article (IPE registration required)

© IPE International Publishers Ltd.