Pensions debate continues

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In a report of the future funding of pensions to be submitted to the Prime Minister in March/April 1999, France's National Economic Planning Agency favours two possible solutions: a progressive increase in the period during which pension contributions have to be paid, to 42.5 years; and an increase in the capital allocated to the reserve fund created in 1998. This assessment has attracted various criticisms from the social partners, prior to consultations.

Within a few decades, according to the French government, current economic and demographic trends could jeopardise the financial stability of the basic retirement pension scheme, which is based on the "pay-as-you-go" (répartition) principle - ie, those currently in employment pay for the pensions of those currently in retirement. The contributor/pensioner ratio will fall considerably and deficits will mount, necessitating increased funding and a substantial overhaul of the basic general pension scheme, including the complete re-engineering of both public and private sector pension plans. The Prime Minister, Lionel Jospin, entrusted the task of reviewing the issue (FR9812147F) to the commissioner of the National Economic Planning Agency (Commissariat Général du Plan), Jean-Michel Charpin, who was due to submit his conclusions some time between late March and early April. Mr Charpin's assessment reportedly identifies two possibilities that could be central to any reform of the pension system: a progressive increase in the period during which contributions are paid from the present 40 years in the private sector and 37 years in the public sector to 42.5 years for both sectors; and a beefing-up of the reserve fund, set up by the government in 1998 with the proceeds of privatisations.

MEDEF, the main employers' organisation, has opted to reserve its judgment on this issue until the government tables its proposals. However, it has already criticised the idea of allocating extra capital to the reserve fund at a time when the budget deficit is high, in particular because this measure could be an alternative to the setting up of private pension funds or the development of retirement savings plans, which MEDEF is calling for.

Reactions from the trade unions differed depending on the solutions put forward. They were generally critical and their position reflected the relative strength of their representation in the private and public sectors. Only the general secretary of CGT-FO, Marc Blondel, expressed strong opposition to public employees being treated in the same way as their private sector counterparts through harmonising the contribution period necessary to qualify for pensions in both sectors. However, even though the issue of the contribution period is no longer completely taboo, all unions are critical of the proposal to increase it to 42.5 years, at a time of high unemployment. CGT considers that an expansion of the base on which contributions are levied to include interest earned on investments could also be a possibility. CFDT has reserved judgment until the Charpin report is officially submitted and the resulting government proposals are released and has refused to state its position on what, for the time being, it considers to be merely working hypotheses.

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