Draft pensions bill aims at fairness for all
France’s pension system is to be reformed following two months of consultations with the social partners. On 18 September the government presented a draft bill to the Council of Ministers that bases pension rights on the length of contribution period rather than by setting a universal retirement age, so that those who begin their working lives young are not penalised. The bill also improves pension rights for the unemployed, and for part-time and older workers.
Restoring the financial balance
The Draft law guaranteeing the future and justice of the pension system (in French) was presented to France’s Council of Ministers on September 18. As requested by the President, François Hollande, it does not raise the statutory retirement age because it would disadvantage those who started work young, without going on to further education. Instead, financial balance in the pension system will be restored by extending the contribution period in both the private and public sectors.
Rather than adjusting the period of social security scheme membership each year in line with changes in life expectancy, the government wants to make it clear to all how the incremental increase in contributions introduced by the reforms will affect pension eligibility, based on year of birth.
The bill therefore sets out, for everyone born before and including 1973, how many quarterly periods of contributions they must have paid before they become eligible for a pension. So members of the social security scheme born in 1973 and who have completed five years of education will retire at 66, having made contributions for 43 years. By comparison, the qualifying period is 41.5 years for those born in 1956.
The date on which pensions are adjusted for inflation will also be moved, from 1 April to 1 October. However, two proposals suggested in the Moreau report on pension reform, commissioned by the government and published in June (FR1306021I), have not been included in the draft bill: alignment of the universal social security tax rate applicable to pensions (6.6%) with the rate applied to earned income (7.5%); and pegging pension increases to slightly below the rate of inflation.
While an increase in contributions is also envisaged, this is not included in the law and is likely to be adopted by decree instead.
Measures aimed at fairness
The draft legislation improves pension rights for young people, the unemployed and part-time workers.
It will now be possible for young people to have paid training or work experience placements counted towards their total pension rights, up to a maximum of two quarters, if contributions have been paid during these placements.
Apprentices will pay contributions towards their retirement, based on their entire salary, allowing them to acquire more quarterly rights during their training, and they will also be allowed to buy back-dated quarterly rights at a preferential rate. Students will also be permitted to buy back-dated quarterly rights at a reduced rate. Unemployed people who take part in vocational training will also earn pension entitlement credits.
The ability to acquire a full quarter’s pension rights has, up to now, depended on how much a worker earned. The reforms lower the cost of a quarterly pension right for those in part-time jobs or with low incomes. It will also be possible for the balance from one year’s contributions to be moved to the following or preceding year if the individual was not able to earn a full four quarters of rights in either of these years.
Harsh working conditions and older workers
A major innovation gives employees who are exposed to occupational risk factors extra ‘points’ which will be credited to a personal account. These can be used to attend a vocational training programme, finance a period of part-time employment or to acquire quarterly pension rights and thus retire earlier.
The phased retirement system, which allows an employee to combine part of his or her old-age pension with paid part-time work and so acquire higher pension entitlements for the future, is to be made more flexible and it will be possible to join the scheme earlier.
Reaction of the social partners
A number of unions judged the reforms to be unfair and two demonstrations were held on 10 September and 15 October. The General Confederation of Labour (CGT), the General Confederation of Labour – Force Ouvrière (CGT-FO), Trade Union Solidarity (SUD) and the Unitary Union Federation (FSU) all supported the rallies.
However, while these protests were not without support, they in no way matched the size of the rallies triggered in 2010 by former President Nicolas Sarkozy’s reforms (FR1012011I). This low-key response can be explained by the absence of measures in the current reforms to converge private and public sector pension schemes or of any special schemes.
The unions generally regarded as reformist – the French Democratic Confederation of Labour (CFDT), the French Christian Workers’ Confederation (CFTC), the French Confederation of Professional and Managerial Staff – General Confederation of Professional and Managerial Staff (CFE-CGC) and the National Federation of Independent Unions (UNSA) – did not directly oppose the reform bill. However, they are trying to amend its content from the side-lines.
The CFDT believes that the French parliament has heeded its call to make it easier for young people to acquire pension rights in its approval of the option for them to buy back-dated quarterly rights. Likewise, the CFE-CGC had called for study periods to be taken into account.
On the other hand, union demands for systemic reform involving a change in financing methods have been ignored.
Employers’ organisations have supported the draft bill although at the same time arguing against any measure that would increase the cost of labour. Since an increase in social security contributions to finance the pension system is included in the scope of the reforms, this argument also seems to have been ignored.
The draft bill adopted on 15 October by the National Assembly remains very close to that presented by the government and is likely to be finally adopted around mid-November.
This is one of the rare occasions when reforms have not provoked strong trade union mobilisation. The consultation period initiated by the government allowed the unions to be listened to and they were heard at least as well, if not better, than when they successfully brought hundreds of thousands of French citizens onto the streets in 2010 (FR1304031Q).
Sandrine Jean, IR Share