Pensions body calls for further pension reforms
The Pensions Stewardship Council has published its report on issues and policies for 2008 regarding pension reform. The Law on pension reform, which was adopted in 2003, provided for an assessment and possible adjustments in 2008. Among the proposals for ensuring sustainability of the system are the need to lengthen the contribution period for full pensions, to raise contribution amounts and to ensure a minimum pension. Trade union reaction has been critical of the proposals.
Issues and policies for 2008
In its recent report (in French, 1.11Mb PDF), the Pensions Stewardship Council (Conseil d’orientation des retraites, COR) considers that the assessment required for 2008 – as provided for under the law on pension reform adopted in August 2003 – allows the opportunity for an extended examination of three major issues. These are: setting higher pension contribution requirements and managing the system more efficiently; retaining people in employment for longer; and the equal treatment of contributors.
Higher pension contribution requirements
The situation regarding the various pension schemes is deemed worse than had been originally forecast. In 2007, it is estimated that the National Old Age Insurance Fund (Caisse nationale d’assurance vieillesse, CNAV) will reach a deficit of about €3.5 billion, compared with the €2.4 billion deficit in 2006. Moreover, it is predicted that, by 2020, the funding needs of the pension system will reach 0.7% of gross domestic product (GDP).
The COR report urges the authorities to adopt a more rigorous approach in running pension schemes. Overall, three levers for action are identified in the report:
- higher pension contributions in both the private and public sectors – more specifically, a 1.5% increase in pension contribution rates based on gross income from economic activity;
- a 10% decrease in the ratio between average net pensions and the average net income from economic activity;
- a longer contribution period, as envisaged in the 2003 law.
The report emphasises the importance of informing the public about such issues, although it concedes that major progress has been made in this area.
Retaining people in employment for longer
Even if a longer contribution period is achieved by 2020, it is estimated that the average retirement age will only be postponed by one fifth of a year in the private sector and by 1.5 years in the public sector. This small increase can be attributed to a number of factors, namely: the reduction of the penalty for shorter-than-standard contribution periods (décote); early exits, most notably, the success of early retirement for those who started working at a very young age; and the fact that – both before and after the reform – people may have already achieved the required number of contributions to retire at 60 years of age, or may still decide to retire at 65 years even if they fail to complete the required number of contributions for a full pension.
The report emphasises the need to ensure consistency in measures that are likely to influence people’s behaviour in terms of labour market participation. One particular criticism relates to the move to extend, until 2014, the possibility of taking a pension before 65 years of age – as adopted in the 21 December 2006 social security funding law.
Equal treatment of contributors
Given the specific nature of each pension scheme, the COR report argues that it is necessary to analyse each of the special schemes individually. The council envisages three particular policies in this respect:
- lengthening the contribution periods in line with life expectancy, while taking into account the physically arduous nature of certain jobs;
- changing family and marital advantages;
- harmonising the way in which pensions are indexed.
Particular attention should be given to the issue of gender inequality, a subject on which a special report is due to be compiled in 2007. Moreover, consideration should be given to those who have interrupted their career or who are affiliated to several basic pension schemes.
At the same time, pension saving schemes should be simplified so that they are clearer. The report points to existing unequal access to pension saving schemes and the risk that this form of saving, which is encouraged through tax incentives, could replace pay.
Reaction of social partners
While the Movement of French Enterprises (Mouvement des entreprises de France, MEDEF) considers that all parameters of the pension schemes should be re-examined, the trade unions for their part are seeking more specific commitments and are critical of the proposals for a longer pension contribution period.
The General Confederation of Labour – Force ouvrière (Confédération générale du travail – Force ouvrière, CGT-FO) and the General Confederation of Labour (Confédération générale du travail, CGT) have opposed some of the report’s recommendations. CGT-FO argues that ‘giving priority to increasing the length of the contribution period as a way of balancing our pension schemes is unacceptable’, particularly in light of the ‘current employment situation, which does not make it possible to keep older employees in their jobs’. CGT-FO also insists on the need to ‘stop the decline in pension levels by revising the methods of indexation’. At the same time, CGT is opposing the recommendation of another increase in contributions and considers that it is necessary to ‘re-open the pensions issue by giving real priority to employment and to the reform of the employers’ contributions, as well as by guaranteeing the future of our pensions system, based on redistribution’.
Meanwhile, the French Christian Workers’ Confederation (Confédération française des travailleurs chrétiens, CFTC) contends that the conditions for any new increase in the length of the contribution period should involve ‘a firm undertaking by companies to negotiate on the second half of their employees’ careers’.
The National Secretary of the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT), Jean-Louis Malys, considers that the ‘key to success’ for ensuring that sufficient funding is in place for pension payments ‘lies in employment policy – current demographic changes provide an opportunity that should be accompanied by long-term deliberate policy for saving and creating jobs. The other condition for success depends on more consistent employer policy regarding older workers’ employment’.
The President of the CNAV, Danièle Karniewicz – also a member of the French Confederation of Professional and Managerial Staff – General Confederation of Professional and Managerial Staff (Confédération française de l’encadrement – Confédération générale des cadres, CFE-CGC) – pointed out that pension reform as such had only been enacted in the private sector. The CNAV president demanded similar efforts on the part of public sector workers who belong to special pension schemes. In the run up to the presidential elections, which took place in April and May 2007, she called on the presidential candidates to commit themselves to more practical objectives regarding the future of pensions.
Promoting employment of older people
On 13 February, the then delegate minister for employment, Gérard Larcher, set up the ‘permanent monitoring group’ provided for in the action plan for older people’s employment. After an initial three-week campaign in the autumn of 2006, a second national communication campaign was launched between 18 February and 14 March 2007, promoting older people’s employment.
Annie Jolivet, Institute for Economic and Social Research (IRES)