Sharp fall in minimum pension scheme claims

The number of workers who rely on the French minimum pension scheme has declined sharply in recent decades. The drop has been put down to the improved coverage of the regular pension system and higher labour market participation rates among women. Female pensioners are still in the majority among beneficiaries of the minimum pension scheme, but it’s thought this trend is likely to reverse. Short contribution periods are the main reason for reliance on minimum pension benefits.

Background

The French minimum pension scheme supports people on low incomes. It helps them reach the legally guaranteed minimum income.

People over the age of 65 are eligible to apply for the scheme, or at 60 for a disability or invalidity pension. To be eligible, a single person must not have an income above €787.26 per month; or €1,222.27 for couples. Since new rules were introduced in April 2013, social housing or family benefits are excluded from the calculation of income.

The previous scheme, launched in 1956, was simplified in 2006 and merged into one common programme known as the solidarity allowance for the elderly (ASPA).

A recent report from the Ministry of Health and Social Protection’s Office for Statistics (DARES) has analysed the personal characteristics and professional biographies of beneficiaries of the minimum pension scheme.

Sharp decline in beneficiaries

Between 1968 and 2004, the proportion of pensioners receiving minimum pension benefits has sharply declined from 27% to 4% – down from 2.4 million to 611,000 beneficiaries. Since then, the number of recipients has further declined, reaching 575,000 at the end of 2008. It has remained roughly stable since then.

The authors of the study say the drop is due to the improved provision of general pension schemes and stronger employment histories among the French workforce. Women, in particular, have, on average, worked more frequently and longer. This means they have earned more and contributed more substantially to the pension system. Nevertheless, there are slightly more women claiming the benefit (56%) than men.

The gender gap, however, changes over time. Women are generally overrepresented in the older age groups (Figure 1). The number of women claimants is strongly concentrated in the group aged 85 and over (26%).

The distribution among men, on the other hand, shows a higher proportion of male retirees on minimum pensions among the younger age groups. This phenomenon might be explained by higher life expectancy, and by increased labour market participation rates of women in more recent generations, but also by the inclusion of parental leave in calculating pension benefits.

Figure 1: Distribution of recipients of the minimum pension by age group, 2008

Figure 1: Distribution of recipients of the minimum pension by age group, 2008

Source: Dares (2013)

Shorter contribution periods

The report shows 20% of minimum pension beneficiaries are not eligible for their own regular pensions – 10% of men and 27% of women. Of those on the minimum pension, 8% are women who have inherited pension benefits from their deceased spouse and 12% are in receipt of other old age benefits below the legal threshold.

The mean amount of revenue for recipients is 31% of the income of regular retirees. Minimum pension claimants receive €487 per month, compared with the general level of €1,713 per month (Figure 2). The gap is more pronounced for men than for women; the mean income of men on the minimum pension is 28% of the income of regular pensioners, compared to 36% for women.

There are a number of factors which explain the lower amounts received. Most notably, recipients of the minimum pension have contributed to the pension scheme for a reduced period in comparison to those who are below the threshold – 23.75 years on average for minimum pension claimants, compared with 36.75 years among the general population.

One of the most common reasons for a shorter working life appears to be early retirement because of disability or invalidity. Figures show 61% of minimum pension beneficiaries have retired early for these reasons, 3.4 times more than regular pensioners (18%).

The authors of the study report that the proportion of foreign-born people is higher in the sample of benefit recipients, and their average contribution is lower. The reason for the lower contributions might be that these people have spent parts of their working life abroad and might not benefit from contributions paid at these times.

Figure 2: Mean income of beneficiaries of minimum pensions and of regular retirees, 2008 (€/month)

Figure 2: Mean income of beneficiaries of minimum pensions and of regular retirees, 2008 (€/month)

Source: Dares (2013)

The data show that more than 71% of recipients live alone. The proportion drops to 43% when looking at older people receiving regular pensions. Again, the majority of single households in receipt of minimum pensions are women. For the average recipient, the state benefits are an important source of income and represent 43% of overall income.

Reference

Barthélémy, N. (2013), Recipients of minimum pensions: past career and pension level, DARES, study no. 857.

Sebastian Schulze-Marmeling, IRShare

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment