French Prime Minister Reveals Pension Reform Plan

New system will be consolidated from 42 separate plans into one.

In a bid to end worker strikes that have paralyzed France for a week, French Prime Minister Edouard Philippe has announced the government’s plan to reform its pension system.

“The time has come to build a universal pension system,” said Philippe at a news conference in Paris. “We are proposing a new inter-generational pact.”

Phillipe, who revealed the plans in a speech at the Economic, Social and Environmental Council in Paris, touted the new system as being fairer than the old one, and one that would provide improved benefits for women and part-time workers.

Under the plan, the government will consolidate 42 distinct pension plans according to occupation and region into one overarching universal plan. The reformed pensions system will be based on points, which is intended to give everyone the same rights for the amount of money they pay into it.

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The legal retirement age will remain at 62, but includes incentives to keep working until age 64, which Philippe said will allow for a balanced pension budget by 2027. Retirees who have worked a full career, which in France is just under 42 years, will receive a minimum of €1,000 ($1,119) a month.

Philippe said the retirement system has been strained because there are only 1.7 people working to support each retiree, compared with 4.5 when the system was created in 1945.

“We know our children won’t have the same linear careers we had and we need a pension system that allows that,” Philippe said, according to Reuters. “We need to have faith in a system that is not deemed to favor one person over another.”

The General Confederation of Labor (CGT), France’s largest railway workers’ union, panned the new plan for the retirement system, and called for its members to continue to strike. The union said the plan does not question the ceiling of the 14% of the GDP devoted to the financing, nor the €120,000 annually of the wages subjected to contribution.

“The government has decided to remain silent to the anger of the workers in struggle and to go into force,” CGT said in a statement. “Faced with a deaf government, the trade unions reaffirm their call to strengthen the mobilization by the strike.”

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University of Virginia Returns 5.8% in 2019, Misses Benchmark

But endowment’s $9.6 billion portfolio outperforms over five, 10, and 20 years.

The University of Virginia endowment’s portfolio returned 5.8% for the fiscal year ended June 30, falling short of its benchmark portfolio’s 7.9% return, and down from last year’s 11.4% return. The returns raised the endowment’s total asset value to $9.6 billion from $9.5 billion a year ago.

Despite underperforming for the year, the endowment has outperformed both its benchmark portfolio and the Wilshire Trust Universe Comparison Service (TUCS) All Master Trust Universe over the long term.

For the five-, 10-, and 20-year periods ending June 30, Virginia’s long-term pool portfolio earned annualized returns of 7.0%, 11.0%, and 10.3%, respectively. This is compared with its benchmark portfolio’s 6.0%, 9.2%, and 5.9% returns, respectively, over the same time periods. The Wilshire TUCS All Master Trust Universe median in comparison showed returns of 5.8%, 9.1%, and 6.2%, respectively. The long-term pool’s passive policy portfolio benchmark is comprised of 60% equity, 10% real assets, and 30% fixed income. 

“After several years of below-average levels of market volatility, fiscal year 2019 was characterized by the return of volatility to equity markets,” Robert Durden, CEO and CIO of the University of Virginia Investment Management Co. (UVIMCO), said in the endowment’s annual report. “Although we anticipate the market environment will remain challenging, we will continue to follow our long-term investment philosophy and consistent investment process.”

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It was the first full year the portfolio was managed by Durden, who joined UVIMCO in April 2018.

“During my first year as CEO/CIO, my primary priority was to review our existing investment policy and process,” said Durden. “As part of this effort, our team dedicated time to reviewing the risk tolerance of the university. We also conducted a deep-dive review of the long-term pool and re-underwrote our strategic asset allocation and liquidity framework, which will guide future decisions about the construction of our long-term portfolio.”

Private equity was by far the top performing asset class for the portfolio during the year returning 21.9%, followed by fixed income and public equity, which returned 6.6% and 6.1%, respectively. Real estate returned 5.1%, cash and currency returned 2.1%, and marketable alternatives and credit returned 1.4%. Resources was the worst performing asset class for the portfolio, losing 10.5% for the year.

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