France’s president Emmanuel Macron is pushing ahead with controversial pension reforms which have sparked strikes across the country.
The reforms, aimed at ensuring the sustainability of the state pension system, are contained in the amended social security financing bill for 2023, which the social affairs committee of the National Assembly (lower chamber of parliament) began to scrutinise today, before it goes to the chamber itself on 6 February.
Applying to all new retirees, the reforms will raise the retirement age from 62 to 64, increasing by three months each year from September 2023 until 2030, by which time it is expected that the social security system will be in balance.
Meanwhile, the number of working years required to qualify for a full pension will be increased from 42 to 43 years by 2027, a more rapid increase than originally envisaged.
However, the age at which an individual can retire without reduced benefits, regardless of their contribution period, will stay at 67: in presenting the proposals, French prime minister Elisabeth Borne said: “This is essential for those, particularly women, who have had a choppy or incomplete career.”
The plans require employers to make additional contributions into the social insurance budget, but this will be balanced by reduced employer contributions to the work accident and occupational disease scheme, which the government said is in surplus.
It is also intended to bring more fairness to the ’long career’ system, where an individual starts work, and retires, earlier than usual.
From 2030, for those who started work between the ages of 16 and 18, for example apprentices, retirement will be possible from age 60, rising to age 62 for those who started between the ages of 18 and 20.
A €1bn investment fund will be set up to prevent professional wear and tear, for those in strenuous jobs, and there will also be better medical monitoring of these employees. It will also be easier for them to retire early, at 62.
Borne said these measures meant that four out of every 10 people retiring each year would be able to benefit from early retirement.
A guaranteed minimum pension, equal to 85% of the minimum wage, will be introduced for those earning the minimum wage throughout their working lives.
The government will also require companies to incentivise workers to stay at work beyond age 60 by improving the quality of their working lives.
This will include the creation of a publicly-available index highlighting good (and bad) practice by companies, in relation to employees approaching retirement.
It will be compulsory for companies with over 1,000 employees from this year, and for those with over 300 employees from 2024.
But opposition to the reforms from unions has been fierce.
On Sunday, 19 January, over one million people attended demonstrations, and further demonstrations and strikes have been announced for tomorrow, Tuesday 31 January.
Furthermore, since Macron does not enjoy an outright majority in parliament, the reforms face a tricky passage through the National Assembly.
However, because they have been presented as amendments to the interim social security budget approved last autumn, Article 47.1 of the French constitution applies.
This means the National Assembly has a maximum of 20 days to debate the Bill, after which the government can present it to the senate, which can take a further 15 days. The government’s intention is for the Bill to be adopted in March, to take effect in September 2023.
Yves Menetrier, wealth business leader at Mercer, told IPE: “The French government’s pension reform proposal combines its absolute priority of restoring financial balance to the system, with ensuring more justice for early workers or those working under harsh conditions. It also allows for higher pension minimums, and better takes into account specific life periods, such as parental leave or time spent caring for family members.”
However, he observed: “The average retirement age in France is already 63 years, given the minimum contribution period needed to receive a full pension, and raising the minimum retirement age from 62 to 64 should theoretically allow private sector pension schemes to curb the expected deficit. But it is still unclear as to how companies will be incentivised or compelled not to get rid of their senior workforce, as they usually do at present.”
He warned: “This point will be absolutely crucial in the success of the prospective reform, both from a technical and social standpoint. Improvements related to incomplete careers might also be made – given the increased minimum pension applies to complete careers only – during the debates in parliament, even though these will only last for 35 days, as the government intends to use Article 47.1 to rush through the negotiations.”
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