Working longer, income guarantees : what’s in France’s pension reform plan?

Working longer, income guarantees : what’s in France’s pension reform plan?

10 Jan    Finance News, PMN Business, REU

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PARIS — French citizens will have to work two years longer before they can retire, part of a deeply unpopular plan to overhaul the country’s costly pension system that will test President Emmanuel Macron’s ability to deliver change in his second term.

Here’s what’s in the pension reform plan:

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WHAT’S IN THE PLAN? * Retirement age pushed back by two years to 64. The change will be gradual, increased by three months per year from September, until 2030. * From 2027, workers will have to make social security contributions over 43 years rather than 42 years in order to draw a full pension. The additional year was already foreseen in a 2014 reform but Macron is accelerating the pace of transition. * Guaranteed minimum pension income of not less than 85% of the net minimum wage, or roughly 1,200 euros per month at current levels, for new retirees. After year one of retirement, the pensions of those receiving a minimum income will be indexed to inflation. The government expects to recalibrate upwards the incomes of those already receiving the lowest pensions. * Public workers in jobs deemed physically or mentally arduous will maintain the right to early retirement, though their retirement age will be increased by the same number of years as the wider labor force.

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Police officers, sewer cleaners, prison guards and air traffic controllers are among those currently able to retire at 52. * The end to a grouping of a dozen so-called ‘special regimes’ with different retirement ages and benefits that currently cover, among others, rail workers, electricity and gas workers and central bank staff.

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This change will only apply to new entrants to the labor market. Existing workers in these sectors keep hold of their perks.

However, the ‘special regimes’ covering sea-farers and Paris Opera House performers survive. * A ‘Seniors Index’ modeled on France’s gender equality index and which would measure the progress made by companies vis-a-vis the training and recruitment of seniors.

WHAT IMPACT? * Boost the employment rate among 60-64 year-olds. In France, the employment rate in this age category is just 33% compared with 61% in Germany and 69% in Sweden. * The pensions of the poorest 30% will increase by 2.5%-5%, according to the government. * Gross savings of 17.7 billion euros per year by 2030. * Balanced pension budget by 2030. Existing forecasts without any reform show a pension budget deficit of 13.5 billion euros in 2030. (Editing by Richard Lough, Alexandra Hudson)

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