France has a high savings rate. Yet these savings are poorly distributed as they are highly inegalitarian and concentrated among the over-50s. In addition, they are not well placed since large sums are invested in real estate ‒ especially residential properties ‒ and in low-risk, fixed-term near-cash products (savings accounts and insurance savings), while the rate of share ownership remains low and annuities thin on the ground. Seniors, especially, prefer long-term multipurpose savings products that they can use as providential insurance, for healthcare, dependency, retirement and as bequests. They opt for contractually long-term products for reasons of selfdiscipline, but not so long term as to commit to a lifetime engagement and lose substantial room for manoeuvre or flexibility (see § 3.2).

Before discussing why this wealth situation is unsatisfactory and proposing ways to solve it, it is important to note that it is not unique to France and is found to one extent or another in many eurozone countries. This is especially surprising since France clearly differs from its neighbours in terms of many factors that could go to explain such a wealth situation: demographic, labour market and social security factors.

France has a higher birth rate than its neighbours, ensuring its generation replacement, and a more generous family policy than elsewhere. Yet its labour market is highly segmented between permanent employment contracts and fixed-term/temporary contracts, making for a core of well-protected 30-55-year old workers and an outer circle of young and senior workers much more exposed to insecurity, unemployment and different forms of labour market withdrawal equated with early retirement. Early exits from work (after 55 years old) are more frequent in France than elsewhere (except Belgium). Unemployment benefit is more generous for executives, with a ceiling of over 6,000 euros well above the norm in other countries. Seniority-based wage scales and guaranteed career advancement (for civil servants and corporate executives) are more widespread than elsewhere. France also stands out for its large volume of tax and social security contributions (45% of GDP), public expenditure (57% of GDP) and social transfers (32% of GDP).

When it comes to wealth, however, an entirely different picture emerges from aggregate national accounts statistics and especially recent microdata from the HFCS survey (Household Finance and Consumption Survey) conducted by the Eurozone’s national central banks. The first observation turned up by these wealth data is that France is in an altogether average position in the Eurozone, in terms of both wealth mean and median (total, financial, etc.), age distribution (see Figure 7), wealth inequalities – share of the richest 1% and richest 10% ‒ and even assets distribution and the structure of wealth. France (with 20% of the Eurozone’s population) is even by far the country closest to the Eurozone average, with minor deviations: slightly fewer homeowners and business assets, slightly more safe assets, a larger real estate bubble in the 2000s, and a slightly more imbalanced share portfolio (in terms of distribution and amount) to the advantage of the wealthiest.

The explanation for this French paradox – which could be a mere coincidence or profoundly structural – is clearly beyond the scope of this paper. This article is divided into two main parts. The first part presents a detailed study of the French wealth situation compared with the few other countries for which data are available. It finds that French society has become increasingly wealth-based since 1980 (Section 1), as inheritances received later in life play a growing role in wealth accumulation (Section 2). Despite the upturn in inter vivos transfers, wealth also appears to be increasingly concentrated in the hands of seniors. Seniors oversave for their old age despite relatively generous welfare benefits, and this **nervous wealth behaviour often prompts them to choose low-risk savings. The senior-heavy wealth imbalance may well reflect generational effects, but it looks set to self-perpetuate as people inherit increasingly late in life due to longer life expectancy and more rights for surviving spouses (Section 3).

The second, more normative part considers responses to this adverse wealth situation summed up by Focus 1. These responses in the form of tax policies (sections 4 to 6) and new life products for the saver’s old days (Section 7) need to address a new demographic deal: the unprecedented and underestimated lengthening of life expectancy. The smartest tax response is an innovative reform of inheritance tax: the Taxfinh (Tax Family Inheritances) measure combines much higher rates of progressive taxation on family inheritance (excluding inter vivos transfers and charitable bequests)
with a wider range of ways to avoid this surtax by means of gifts and consumption of own wealth. The main new products for the consumption of own wealth in an increasingly long old age are the “pooled viager”, or viage, and a reverse mortgage specially designed to cover long-term care in old age.

This second and inevitably more controversial part is bound to prompt debate. Bear in mind that the proposed reforms come in response to straightforward considerations: what is seen as a particularly negative current wealth situation; the unprecedented lengthening of life expectancy; and the ambition to promote growth-stimulating incentives that prevent an overconcentration of inheritance-related wealth.

Luc Arrondel et André Masson

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