Five-year agreement reached on supplementary pensions

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In November 2003, French employers' associations and most trade union confederations reached an agreement on the ARRCO and AGIRC supplementary pensions schemes. This five-year agreement maintains provisions enabling retirement with a supplementary pension from the age of 60, transcribes a number of provisions contained in a recent pension reform law, and takes action to balance the budget.

After five bargaining sessions, employers’ associations and four out of five nationally representative trade union confederations reached a new agreement on France's supplementary pensions schemes on 13 November 2003, covering the period from 1 January 2004 to 31 December 2008. The previous agreement on the general supplementary scheme, ARRCO, and the management and professional staff supplementary scheme, AGIRC, was signed in February 2001 and was due to expire on 31 December 2003 (FR0103136N).

This agreement maintains the Association for the Management of Funds Financing AGIRC and ARRCO (Association pour la gestion du fonds de financement de l’AGIRC et de l’ARRCO, AGFF) arrangement set up by the previous agreement to fund supplementary pensions paid out to workers between the age of 60 and 65. It also transcribes the provisions contained in the 'Fillon law' of 21 August 2003 on pension reform (FR0309103F) into the supplementary schemes, and takes action to balance the budget.

The AGFF, which was to end in December 2003, has been fully renewed for five years. This scheme allows contributors to the AGIRC and ARRCO funds aged 60 to 65 to obtain a supplementary pension without reduction as soon as they become entitled to a full old age pension. Intersectoral negotiations will begin before the current agreement expires in order to determine the methods for integrating the AGFF into the AGIRC-ARRCO funds. From 2004, the AGFF surpluses recorded at the end of each financial year will be redistributed between the AGIRC and the ARRCO on a pro rata basis according to the benefits paid out.

The new agreement transcribes two provisions of the Fillon reform law into the supplementary schemes:

• employees who started working very young will also be able to retire before 60 without a reduction of pension entitlement (FR0312102N). This provision will be funded by the AGFF; and

• the deal sets out the options for buying supplementary pension contribution 'points' to cover periods when the person insured was in education. People who have paid contributions into the general scheme will be able to acquire in one go a flat-rate 70 points per year spent in education, up to a three-year ceiling, in each of the schemes. These payments will be calculated in such a way that they have no actuarial consequences.

The social partners do not so far have the government decrees relating to the other provisions in the Fillon law (early retirement for employees with disabilities, survivors’ pensions, part-time workers paying full-time contributions etc) to work with. They thus plan to meet again during the quarter following the publication of these decrees, and by December 2004 at the latest, in order to adapt the AGIRC-ARRCO schemes to these new provisions. Current provisions relating to family-related increases for example, will have to be simplified and harmonised.

Lastly, the schemes' operating parameters have been amended:

• the wage used as the basis for calculation (ie for the purchase of one retirement 'point') will henceforth be tied to the average wage, rather than to prices. This decision aims to raise the cost of buying a point;

• the value of the point used in calculating supplementary benefits from 1 April 2004 to 1 April 2008 will be linked to the consumer prices index (excluding tobacco); and

• to cover the funding of AGIRC management and professional staff scheme, which has been in deficit for a year, and bring the distribution of contributions progressively into line with that of ARRCO general scheme (ie 60% from the employer and 40% from the employee), the employee’s contribution to AGIRC will be raised by 0.16 percentage points on 1 January 2006 and the employer’s will be increased by 0.08 points.

The agreement contains a revision clause for 2006, in order to assess the effects of the steps decided upon, update the forecasts and take any corrective measures required.

The Movement of French Enterprises (Mouvement des entreprises de France, MEDEF) employers' confederation has welcomed the deal on supplementary pensions, interpreting it as a victory for social dialogue. The Craftwork Employers' Association (Union professionnelle artisanale, UPA) commented very favourably on the agreement, particularly the provisions on people with long working lives and the integration of the AGFF.

As far as the trade unions are concerned, four signed the agreement - the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT), the General Confederation of Labour-Force ouvrière (Confédération générale du travail-Force ouvrière, CGT-FO), the French Christian Workers' Confederation (Confédération française des travailleurs chrétiens, CFTC) and 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). These unions were very pleased to have made the right to retire on a full pension at 60 under the supplementary schemes (which had hitherto been regularly challenged by employers) permanent, introduced the right to early retirement for people with long working lives and protected the purchasing power of pensions, and welcomed the concession by MEDEF of an increase in employers’ contributions, albeit a small one. Only the General Confederation of Labour (Confédération générale du travail, CGT), refused to sign the agreement. CGT asserts that, by increasing the price of retirement points more rapidly than previously, the deal will progressively reduce the yield from the supplementary schemes and disadvantage the younger generation.