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Edition December 3, 2018 - Crédit Agricole S.A.
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  • Edition December 3, 2018

    France – Pensions: The state of play and future reform issues

    The reforms in the 2000s warded off the risk of a severe deterioration in the pension systems deficit. The financial balance, which is currently close to equilibrium, is likely to remain so in the short term. It is felt to be positive in favourable scenarios, but would again go into deficit, by 1-1.5% of GDP a year from 2030 in the more cautious scenarios. A new pensions reform has been announced whose prime objective is to roll out a universal regime that would be clearer and fairer. It would still be a pay-as-you-go system but would shift completely to a points-based regime.

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  • Content:

    - The demographic and economic backdrop
    - Changes to the financial balance
    - Current operation of pension schemes
    - Objectives of the future reform

  • Extract:

    A points-based regime system would effectively be fairer and allow for more flexible management via adjustments to the various parameters (ie, the purchase value of a point, and the value of servicing a point).

    But unlike the current, defined-benefit state pension scheme, the future pensioner will not be able to calculate the value of their future pension precisely; this means that there is a potential risk of a cut to pensions, in the event of an economic shock and a more market-led replacement rate than in current projections.

    The reform will bring in a fairer system with global oversight. Deploying it will, however, involve a number of difficulties such as the unification of the many and very different regimes, and the transition between the former and the new system, etc.

    The reform does not entail any further savings measures and retains the legal retirement age of 62. One may however, estimate that raising the retirement age (which is lower than the EU average of 65) would help to absorb pension scheme deficits long term and restore some room for manoeuvre in fiscal policies.

  • Associative topics : Economics | France


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