What Future for France’s Pension Reserve Fund?

We use a model based on the latest forecasts by the French Retirement Advisory Council (Conseil d’Orientation des Retraites: COR) at the moment when the study was carried out and a Bootstrap simulation of the rate of return on the financial portfolio of the French Pension Reserve Fund (Fonds de Reserve pour les Retraites: FRR). Our results indicate that the FRR will cover at most 24% of the expected deficit in 2020 and 14.9% in 2040. We also explore the benefits and risks of a multi-pillar pension system in which the FRR is turned into a permanent “public pension fund” (Fonds de Pension Public: FPP). The FPP contribution might raise the replacement rates substantially from 2050 on. However, the transition is long and risky owing to the significant probability of a lower replacement rate in the multi-pillar system in the first 30 years.