France: government adopts draft legislation reforming the country’s pension schemes

On 24 January, against a backdrop of mobilization by several of the country’s trade unions (the next inter-professional strike is scheduled for Wednesday 29 January), the French Government adopted two pieces of draft legislation geared to instituting a universal points-based pension system. This future universal system will mean an end to the current 42 professional pensions schemes that makes the French pension landscape as complicated as it is. However, although the new system will remain based on the pay-as-you-go principle, whereby employees contribute to their own pension payouts, the system will be points-based. Points will be acquired throughout an employee’s career and credited to each scheme member’s personal pension account. In contrast with the current system that requires a minimum number of hours to be worked across a specified period of time before pension rights are released, every hour worked in the new system releases the rights to pension points, and in order to safeguard social equity, each euro contributed to the scheme earns equal pension rights. The legal retirement age of 62 will not be changed but an incentive system encouraging longer careers (a bonus/malus system) up to a certain threshold or equilibrium age is nonetheless on the cards (Ed. note: in order to ensure pensions financing). The equilibrium age, which will only apply to those within the universal system will be set for each generation cohort and will adjust every year by 2/3 of the change in life expectancy upon retirement for the given generation cohort. In the draft legislation’s impact study, the equilibrium age estimated for the 1975 generation is 65. The trade unions opposing the pension reforms (CGT, FO, CFE-CGC) are refusing to allow any elimination of the special regimes (special professional categories, e.g. rail workers, electricity and gas industry workers), and they are also refusing to entertain the notion of calculating pension amounts on full career earnings instead of the currently operating alternatives that include different periods for specific schemes, and the general scheme’s basis of the best 25 years.