On the 19th of January 2016 a documentary focusing on savings and life insurance in France was broadcast on France 5.
Amongst others, Guillaume Prache, Managing Director at BETTER FINANCE, was interviewed on the topic and brought up the story of the day he looked into the account statements from his mother who contributes to the supplementary pension CREF.
"When we looked more closely at the processes of this system”, he said, “we realized that there were insufficient funds at hand to meet their commitment to provide a lifetime pension and as well as the paying the indexed salaries of civil servants. Our first reaction was to warn all investors. "
Indeed, 450,000 civil servants are not aware of this but will soon find out and lose 30-60% of their savings or pensions that were promised. They will also discover that the money they put aside for a rainy day was actually used to pay the rent of luxury Parisian apartments for the directors of the scheme, amongst other practices.
Guillaume Prache stated that "most of the executives had apartments fully paid by the members of the CREF as well as other benefits such as company cars, unbeknownst to them. This was carried out entirely without the knowledge of the members and it is only when a group of members who eventually formed an association, that they were able to obtain copies of this report and file a complaint about it. "
In the course of 2000, Guillaume Prache got his hands on a secret report from the organization that controls the management of social spending in France. He realized that the insurance company hides lots of money in its coffers.
He declared: "This report is devastating; it reveals perhaps the worst savings scandal ever witnessed in France. The report actually states, black on white, that the CREF had a provision of just 6 billion francs when it ought to have accumulated 17 billion. It therefore lacks 11 billion francs, that is to say 1.6 billion euros. It was a cavalier system, with the managers of the regime counting on future contributions and future members that they tried to recruit every day to pay the old members who were retiring. If there would have been even a minor reduction in future members or a decline in contributors, the regime would have imploded. In addition to this, it was totally illegal.”
In 2001 investors filed complaints and the judiciary found that the insurance company purchased more than 350 apartments in Paris to house its staff, among others. It appears that since 1974, when René Taulade, former Minister under Mitterrand and close friend of the Socialist Party, took over as the head of the CREF, there was a surge in bribes to the benefit of his cronies from the SP. Moreover, during 2 years, the treasurer of the association was a certain Francois Hollande…
Politicians will not be brought to justice ... but in 2014, the former leaders of the CREF were convicted and condemned for their unacceptable lifestyle at the expense of those saving for a rainy day.
Watch the full interview in French here.