April 13. 2024. 5:40

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Decoding the French pension reform

Ahead of the French pension reform bill reaching the Senate on 20 February, EURACTIV France analyses and summarises the text proposed by the government – from special retirement plans to the senior index.

The pension reform, promised by incumbent President Emmanuel Macron during the first round of his presidential electoral campaign, has been hotly contested by the French public, with strikes and protests seen across the country.

Amendments and various articles of the draft law on the financing for social security for 2023 have been debated by French MPs in the National Assembly since 6 February and will continue until 17 February before the bill is passed to the Senate on the 20th.

Special retirement plans

The reform introduced by Prime Minister Elisabeth Borne’s government aims to abolish the main special retirement plans. These special plans apply to the employees of some state-owned companies, such as the public transport system (SNCF and RATP), notaries, the electricity and gas industries (IEG), the Bank of France, as well as the Economic, Social and Environmental Council (CESE).

The switch to the general pension plan would only apply to employees hired after 1 September 2023 – a ‘grandfather clause’, which means that staff already in service will therefore be maintained in the previous special regime.

Independent or very specific pension funds will not be affected by the reform. These include those of the self-employed, lawyers, sailors, the Paris Opera and the Comédie française employees.

Duration of pension contributions

The executive’s draft does not provide for any further extension of the contribution period compared to the previous reform, the Touraine reform introduced in 2013-2014, during François Hollande’s mandate. It is, therefore, still necessary to validate 172 quarters (43 years of service) to be entitled to a full pension.

However, the timetable of the Touraine reform will be accelerated by the actual reform. While the transition from 42 to 43 years of service should have been fully achieved in 2035, the new bill anticipates this objective by eight years, setting it for 2027. In other words, if the draft is adopted, workers born from 1965 onwards will have to contribute 172 quarters, whereas the Touraine reform planned the change only for the 1973-onwards generation.

This accelerated timetable also applies to civil servants.

Minimum pension?

An increase in minimum pensions of up to €100 has been introduced. The bill states that people who have had a full career of 172 quarters, working full time and being paid at the minimum wage all life long (SMIC), should receive a minimum pension of 85% of net SMIC (which today corresponds to about €1,200).

To meet this target in the long term, the reform bill provides a maximum increase of €100 (pro-rated according to the number of quarters of service), which will also be extended to currently retired workers. Thus, a pension below €1,100 will not be raised to €1,200.

The legal age of retirement

The extension of the legal retirement age is both the flagship measure of the government’s project and the most controversial measure for the unions, the left, and public opinion.

The reform provides for the age to be gradually pushed back from 62 to 64 years. From 1 September 2023, the legal retirement age will be increased by three months per generation.

Thus, a person born at the end of 1961 is subject to a legal retirement age of 62 years and three months, while a person born in 1962 will retire at 62 years and 6 months, and so on. Workers born from 1968 onwards will all be bound by the legal retirement age of 64.

The exceptions: arduousness, unfitness and disability

Nevertheless, some exceptions remain, but they too are subject to a two-year setback to the current pension plan. This applies to public service employees whose jobs are dangerous or arduous, such as police officers, nurses employed as civil servants, orderlies and prison guards. The legal retirement age for these professions is raised from 57 to 59 years (“active” categories) or from 52 to 54 years (“super-active” categories).

As for the other workers who do not fall into these categories, certain hardship criteria have been made more flexible so that they can be better taken into account. This applies to night workers, who will have to justify 100 working nights per year to be eligible, as opposed to the current 120, and to workers working in rotating shifts, which will be reduced from 50 to 30 nights per year.

However, the criteria for ergonomic risks (including heavy loads, painful postures and mechanical vibrations) will not be reinstated in the list of hardship criteria, from which they were removed in 2017. In exchange, the government is expected to increase funding for the prevention and retraining of employees exposed to risks in the workplace.

For people recognised as disabled or unfit for work, the legal retirement age remains at 62. The early retirement plans due to disability (age 55) and asbestos exposure (age 50) also remain unchanged. The conditions for accessing the disability regime have been eased to facilitate its application. The incapacity rate for the early retirement regime for disabled workers has been lowered from 80% to 50%, making it more widely applicable.

The government will also create mechanisms to consider parental leave and time off work for “relative caregivers” in the long career calculation.

Long careers

Workers who started their careers early in life and would also be subject to the basic retirement age of 64 will benefit from adjustments that will ensure their working lives are not overly long. Thus, for a career that began before the age of 20, the contribution period may not exceed 44 years. This means that the full retirement age can be as early as 58 if the person started working before age 16.

To benefit from the early retirement regimes for long careers, it is necessary to “justify” four to five quarters of contributions over the period preceding the age limit (16, 18 or 20 years), which implies working in a declared position during the given period.

End of discount age and progressive retirement

The extension of the legal retirement age automatically sets back the discount mechanisms by two years. However, the so-called “discount cancellation” age will not be affected and will be maintained at 67. The discount system allows a worker to leave his job without having collected all the quarters he was supposed to contribute in exchange for a reduction in his pension.

The government also wants to simplify combining work and retirement, which makes it possible to resume work – usually part-time – after retirement while continuing to receive a pension. This allows additional quarters of contribution to be accumulated, thus creating new rights.

Progressive retirement is another option. It allows people to reduce their working hours towards the end of their careers and compensate for the loss of income by receiving a portion of their pension. The reform extends this option, which was limited to employees under the general regime, to employees under special regimes, self-employed and civil servants.

Senior index

The government also wants to create an obligation to publish data on the employment of older employees in companies and the measures taken internally to promote it. This aims to expose bad practices and promote virtuous companies.

Finally, unlike what some people have suggested in recent weeks, all of the bill’s measures fall within France’s competence and are neither imposed by the EU nor derived from European law. The pension reform was indeed included in the Commission’s recommendations, as this was a wish of the French government since 2019, but these recommendations are not binding.