FRPS: All About Supplementary Occupational Retirement Funds

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In summary

The Supplementary Professional Retirement Funds (FRPS) are structures dedicated to managing additional retirement commitments in France. Created to meet European standards, they enable insurers to optimize fund management while ensuring better security for beneficiaries.

🔎 What is an FRPS?

An Additional Professional Retirement Fund (FRPS) is a distinct legal entity, specifically created to manage additional retirement commitments of insurance companies. These funds aim to secure savings while offering a regulatory framework that is more flexible and better suited for long-term investments.

🔍 An independent legal entity

Unlike traditional insurances, which manage various types of contracts (life insurance, welfare, financial investments, etc.), an FRPS focuses exclusively on additional occupational retirement contracts. This separation allows for optimized financial management and better control of long-term commitments.

FRPS must obtain an approval issued by the ACPR (Prudent Financial Regulation Authority), which monitors their financial solidity and beneficiary protection. They are subject to specific regulatory requirements, particularly in terms of solvency and investment governance.

📌 Management better suited for retirement commitments

Supplementary retirement contracts require long-term investments to guarantee pension or capital benefits to beneficiaries at their retirement. An FRPS allows insurers to invest more freely in diversified assets, such as:

• Real estate (offices, housing, infrastructure),
• Stocks (listed and unlisted company shares),
• Government or corporate bonds,
• Alternative funds (private equity, private debt funds).

Thanks to this diversification, FRPS can optimize yields while maintaining a controlled risk level.

🛠️ Why were FRPS created?

FRPS were implemented in 2016 to respond to evolutions in the retirement market and increased regulatory constraints impacting insurers. Before their creation, commitments of additional retirement were integrated into other activities of insurance companies, complicating financial management and solvency. The main goal of FRPS was to clearly separate retirement commitments from other insurance activities to ensure greater security for beneficiaries.

Thanks to this reform, insurers now have a better-suited framework for managing long-term commitments, allowing them to optimize financial investments while guaranteeing greater stability for policyholders.

📜 A regulatory framework more flexible than Solvency II

Why did Solvency II pose a problem?

Before the creation of FRPS, supplemental retirement contracts were subject to Solvency II regulation, which imposed strict financial constraints on insurers. This regulation required companies to hold significant equity capital, limiting their investment capacity. Result? Less flexible management and lower returns for beneficiaries.

Advantages of the FRPS framework

With the introduction of FRPS, insurers benefit from a new legal framework inspired by the IORP II Directive, which offers several advantages :

• Easing capital requirements, enabling insurers to allocate more resources to investments.
• More flexibility in management, promoting more dynamic investment strategies.
• Yield optimization for beneficiaries, through better-suited long-term investments.

This framework thus gives insurers greater room for maneuver, while ensuring a more stable and efficient management of their retirement savings.

📈 A need for securing retirement commitments

A complex economic and demographic context

Retirement funds must ensure that capital will be available for future retirees. However, several factors make this mission more difficult :

• Increased life expectancy, extending the period during which retirees receive a pension.
• Stock market volatility, which can weaken long-term investments.
• Budget constraints of states, reducing public aid to pension schemes.

How do FRPS provide a solution?

FRPS allow securing management of retirement commitments by offering: ✅ Better management of commitments, because funds are exclusively dedicated to supplementary retirement.
✅ Better-aligned investments with long-term needs, favoring more profitable placements.
✅ Enhanced protection for beneficiaries, as the returns generated by the fund are exclusively redistributed to members.

Thus, FRPS enable the financial sustainability of retirement systems, while guaranteeing a higher stability for beneficiaries.

🏦 A solution for large insurance groups

Why have insurers adopted FRPS?

Since their implementation, many insurance groups have chosen to use FRPS to better structure their commitments and optimize their profitability. This solution allows them to :

• Reduce the impact of Solvency II requirements, easing their financial management.
• Improve investment performance, by favoring more long-term strategies.
• Provide better guarantees to policyholders, ensuring a clear separation of retirement commitments from other activities.

Major actors with an FRPS

Many groups have already set up their own FRPS :

• AG2R La Mondiale → La Mondiale Retirement Supplementary
• Generali France → Generali Retirement
• Swiss Life and Agrica, which obtained an ACPR approval
• Crédit Agricole Assurances, which set up a FRPS for its retirement activities

Thanks to these FRPS, insurers can better manage their commitments and offer more efficient retirement products, while guaranteeing savers increased security.

📜 The regulatory framework of FRPS

FRPS (Supplementary Professional Retirement Funds) are strictly regulated by the Insurance Code, notably in Title VIII (Articles L381-1 to L385-10). This legal framework was designed to guarantee stability and financial security of supplementary retirements, while providing insurers with greater flexibility in asset management.

📖 Main rules governing FRPS

FRPS must strictly adhere to several regulatory requirements, including:

📌 1. Compliance with European standards (IORP II Directive)

FRPS are aligned with the IORP II Directive, which aims to harmonize the management of occupational retirements within the European Union. This directive mandates :

• Enhanced governance, with strict requirements on managing risks and assets.
• Increased transparency, requiring FRPS to publish detailed reports on their financial situation.
• Protection of beneficiaries, ensuring that retirement savings are secured and well managed.

By adopting this European framework, France allows insurers and financial institutions to better structure their commitments to supplementary retirement.

📌 2. Mandatory approval by ACPR

Before operating, a FRPS must obtain approval from the Prudent Financial Regulation Authority (ACPR). This independent authority, under the supervision of the Bank of France, ensures : ✅ Financial solidity of FRPS before launch.
✅ Compliance with governance rules, especially in risk management.
✅ Strict application of regulatory obligations, to protect beneficiaries.

ACPR regularly audits FRPS to ensure they meet prudential standards and possess the necessary funds to fulfill their commitments.

📌 3. Specific solvency obligations

FRPS must follow tailored prudential rules, which lie between those of classic insurance (Solvency II) and those of European pension funds (IORP II). Their solvency obligations include :

• A sufficient reserve requirement to cover ongoing commitments.
• Annual stress test, to evaluate their capacity to withstand financial shocks.
• Prudent asset management, based on the prudent person rule, which prohibits taking excessive risks.

These requirements guarantee that promised pensions and annuities to policyholders will be honored long-term.

📊 Summary table of regulatory obligations for FRPS

📊 Differences between an FRPS and a traditional retirement insurance

The Supplementary Professional Retirement Funds (FRPS) and classic retirement insurance contracts are two distinct solutions, governed by different regulatory frameworks. While classic life insurances provide a generalist approach to savings, FRPS are specifically designed for managing supplementary occupational retirements.

📌 Detailed comparison of FRPS and traditional insurances

📌 A more flexible approach for FRPS

The main advantage of FRPS lies in their asset management. Thanks to the IORP II Directive, they have more freedom to diversify investments and optimize yields without being subject to the same constraints as life insurances under Solvency II.

FRPS enable: ✅ Long-term investments, better suited to retirement commitments.
✅ A better balance between yield and risk, by easing certain solvency constraints.
✅ Dedicated retirement management, providing greater security for beneficiaries.

However, traditional life insurance, while offering enhanced protection, is often less efficient for retirement contracts because prudential constraints limit investment opportunities.

🔍 Which option to prioritize for optimal retirement savings?

Choosing between an FRPS and a classic life insurance depends on the saver’s needs :

• 🔹 Are you seeking specific management for retirement? → An FRPS is more suitable.
• 🔹 Do you want a versatile product for multiple financial goals? → Traditional life insurance is a better option.

🏛️ Examples of companies adopting an FRPS

Since their inception, several major insurance groups have chosen to establish their own Supplementary Professional Retirement Funds (FRPS). This strategic choice allows them to secure their retirement commitments, optimize their long-term investments, and better meet regulatory requirements.

📌 Leading actors who have structured an FRPS

Many companies have taken the step to create a FRPS, benefiting from a more flexible framework than Solvency II:

📊 Why did these companies choose an FRPS?

Major insurance groups decided to adopt an FRPS for several reasons: ✅ Secure their retirement commitments while liberating from Solvency II constraints.
✅ Maximize their investments by opting for a more dynamic management.
✅ Offer better performance to beneficiaries through a relaxed prudential framework.
✅ Align their management with the IORP II Directive, favoring a long-term approach.

🔍 A rapidly growing model

Since 2020, the creation of new FRPS has accelerated in France. The ACPR approved several approvals, allowing insurers to better structure their supplementary retirement contracts. This trend is expected to continue, with FRPS becoming a standard for managing occupational retirements.

💡 What are the benefits of an FRPS?

FRPS (Supplementary Professional Retirement Funds) offer numerous benefits, both for insurers and for contract beneficiaries. Their creation aims to optimize financial management of retirement commitments while ensuring better security for policyholders.

📌 1. Optimized management for more profitable investments

Thanks to a more flexible framework than Solvency II, FRPS can diversify their placements and adopt more dynamic investment strategies. This allows them to :
✅ Invest more in high-yield assets, such as real estate, stocks, and corporate bonds.
✅ Improve the management of long-term investments, better suited to retirement commitments.
✅ Enhance fund performance, directly benefiting contract beneficiaries.

📌 2. Better solvency for increased protection of savers

FRPS benefit from a solvency level better suited to managing retirement commitments. Unlike regulatory but limited insurance companies subject to Solvency II, FRPS can allocate more resources to investments without being penalized by excessive capital constraints.
This allows :
✅ Greater financial security, ensuring that retirement commitments will be honored ✅ Controlled risk exposure, thanks to annual resilience tests mandated by the ACPR.
✅ Enhanced protection of beneficiaries, as generated returns are fully redistributed to members.

📌 3. An adapted regulatory framework favoring long-term investments

The regulatory framework of FRPS is based on the IORP II Directive, which promotes long-term investment strategies. Insurers can thus :
✅ Avoid excessive market fluctuations by adopting a more patient and considered approach.
✅ Promote secure and profitable placements, suitable for retirement savings.
✅ Ensure yield stability, thus avoiding the negative impacts of economic crises.

🔄 What impact on your retirement savings contract?

If your additional retirement contract is transferred to an FRPS, no major change is expected. However, some improvements may be beneficial for beneficiaries.

📌 1. Guarantees remain the same

Transferring a contract to an FRPS does not affect guarantees or commitments made by insured individuals. Specifically :
✅ The general conditions and benefits of the contract remain unchanged.
✅ The acquired rights stay unchanged, whether it’s a lifelong pension or a capital upon retirement.
✅ Beneficiaries of the contracts keep the same advantages in terms of retirement.

📌 2. More efficient management for better yields

Moving to an FRPS enables improved financial performance of contracts via optimized asset management. This means :
✅ More profitable placements, leading to better fund growth.
✅ Better resource allocation, with investments aligned with retirement horizons.
✅ Reduced costs related to Solvency II requirements, which can directly benefit policyholders.

📌 3. Profit participation redistributed to members

Unlike a traditional retirement insurance, where part of the profits can be retained by the insurer, an FRPS guarantees that profits generated are fully redistributed to beneficiaries. This allows :
✅ Higher yields on retirement savings, thus increasing the capital available at retirement.
✅ Better fairness among members, as surpluses are exclusively for insured persons.
✅ Increased transparency, as FRPS are required to publish detailed financial reports regularly.

🔮 The future of FRPS in France

With the growing market for supplementary retirement, FRPS are emerging as a key player in France’s financial landscape. Their rise is largely driven by demographic, economic, and regulatory developments that favor more flexible and high-performing retirement savings solutions.

📈 Rapid growth and central role in 2023

The success of FRPS has been confirmed in recent years, especially in 2023, where :
✅ 83% of supplementary retirement funds were managed by seven major FRPS, demonstrating their growing influence in the market.
✅ Several ACPR approvals have been granted, enabling many insurance companies to transfer their commitments to these specialized frameworks.
✅ Retirement savings investments have experienced a significant rise, supporting the growth of FRPS.

📌 Addressing demographic and economic challenges

With increased life expectancy and decreasing public pensions, French citizens need to plan their retirements carefully. The FRPS address these new challenges by offering :
✅ A more profitable alternative to traditional schemes, with improved investment management.
✅ A guarantee of financial stability, enabling beneficiaries to secure their savings.
✅ Diversification of placements, reducing the impact of economic fluctuations on retirements.

🏛️ A model increasingly attractive to insurers

Many insurance groups have already adopted the FRPS model to optimize their management of occupational retirements. With the PACTE law, which encourages companies to offer more attractive retirement savings plans, other players are likely to follow this trend to :
✅ Improve the profitability of their retirement products.
✅ Ease regulatory constraints, benefiting from a less restrictive framework than Solvency II.
✅ Strengthen savers’ confidence, thanks to a clear separation of retirement funds.

🔍 Perspectives for the evolution of FRPS

In the coming years, several trends are expected to strengthen the role of FRPS in France :
🚀 An increase in approvals granted by the ACPR, promoting migration of contracts to these frameworks.
📊 Adaptation of the regulatory framework, with possible adjustments to better regulate these funds while giving them more investment flexibility.
💡 Rise of new investment strategies, especially towards sustainable and responsible assets, linking to ecological transition and green finance.

📌 Different categories of contracts eligible for FRPS

FRPS (Supplementary Professional Retirement Funds) were created to secure and optimize management of retirement commitments in France. They target various types of supplementary retirement contracts, covering independent workers, employees, and companies.

📜 Contracts covered by FRPS

Eligible contracts for FRPS include :

📝 Type of contract	🔍 Description
Madelin and Madelin Agricultural Contracts	Devices reserved for self-employed, liberal professionals, and farmers, enabling a retirement savings with tax advantages.
Defined contribution schemes (Article 83)	Retirement savings plans subscribed by companies for their employees, where the employer makes regular contributions.
Defined benefit schemes (Article 39)	Schemes guaranteeing a predefined pension level upon retirement, mainly for executives and long-standing employees.
Retirement Savings Plans (PER)	Products introduced by the PACTE Law to simplify retirement savings, accessible to individuals and companies.

💡 Why are these contracts integrated into FRPS?

These contracts are specifically suited for long-term management. By integrating these commitments into an FRPS, insurers benefit from:
✅ Better asset allocation, adapted to long-term investment horizons.
✅ Enhanced protection for beneficiaries, as the yields generated are exclusively redistributed to members.
✅ More flexible framework, allowing investment optimization and improved profitability.

💰 How does FRPS taxation work?

One of the main benefits of FRPS is their attractive tax treatment, which encourages both companies and savers to subscribe to retirement contracts.

📌 Tax benefits for members

Savers investing in a contract managed by an FRPS benefit from :
✅ Tax deductions: contributions made to PER, Madelin contracts, or collective schemes can be deducted from taxable income.
✅ Exemption from capital gains: during the savings phase, investment yields are not taxed, promoting capital growth.
✅ Reduced tax on lifelong annuities: at the time of fund unlocking, the annuity benefits from a tax allowance based on the beneficiary’s age.

📌 Tax benefits for companies

Employers establishing a supplementary retirement scheme via an FRPS can benefit from :
✅ Tax deductions on contributions paid for employees within a collective PER or Article 83.
✅ Social contribution exemptions on certain employer contributions dedicated to retirement savings.
✅ Optimized accounting treatment, which improves the management of the company’s financial commitments.

🌍 FRPS and responsible investing: a model aligned with sustainable finance

With the rise of sustainable finance, FRPS increasingly incorporate ESG criteria (Environmental, Social, and Governance) into their asset management. The IORP II Directive also obliges managers to consider these factors in their investment decisions.

📊 ESG strategies applied to FRPS

📢 FRPS investments are evolving towards more responsible assets to ensure better profitability while limiting risks. Observed trends include :

✅ Investments in renewable energy 🌱: FRPS favor funds invested in wind, solar, or green infrastructure.
✅ Reducing exposure to polluting industries 📉: many insurers decrease investments in oil and coal sectors.
✅ Shareholder engagement 💼: as institutional investors, FRPS participate in general meetings to influence social and environmental policies.

💡 Why has ESG become a key issue for FRPS?

The transition to a greener economy is encouraged by regulators and investors. Responsible investments offer :
✅ Greater resilience to economic crises.
✅ Alignment with European regulations on sustainable finance.
✅ Competitive returns, as ESG assets have demonstrated a solid long-term growth.

📢 What challenges do FRPS face in the coming years?

Although FRPS are experiencing increasing success, several major challenges need to be addressed in the future.

📌 1. Adjusting the regulatory framework

FRPS enjoy a more flexible framework than Solvency II, but adjustments might be necessary to ensure long-term stability. Expected evolutions include :
✅ Strengthening transparency requirements for fund management and investments.
✅ More stringent assessment of FRPS solvency, to prevent financial failures.
✅ Better European harmonization, to facilitate pension management within the EU.

📌 2. Improving insured information

Despite their potential, FRPS remain relatively unknown to the public. To increase their attractiveness, it is necessary to :
✅ Make FRPS more accessible via educational platforms and online simulators.
✅ Inform savers about the advantages and operation of FRPS.
✅ Communicate about fund performance to reassure members.

📌 3. Maintaining attractive profitability

In a context of low interest rates, FRPS must find alternatives to generate competitive yields. Strategies include :

• Increase investments in rental real estate and infrastructure.
• Boost allocations to corporate bonds and private equity.
• Focus on ESG investments, which offer a good compromise between yield and risk.

The Supplementary Professional Retirement Funds (FRPS) represent a key reform for retirement management in France. Thanks to a specific regulation, they provide insurers with greater flexibility and beneficiaries with enhanced security.

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