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The Pension Guidance Council estimates that the system should be in the red in the coming years and beyond. An announcement that can be useful to supporters and opponents of the 2023 pension reform.
© Illustration Capital / Freepik
– The Pension Guidance Council announces that the system will be in the red for the next few years.
This was one of the arguments regularly put forward by Elisabeth Borne’s government to defend pension reform. Raising the legal age from 62 to 64 should make it possible “to ensure the balance of the pay-as-you-go system by 2030”, affirmed the Prime Minister, during the presentation of the pension reform in January 2023. Objective achieved? Not at all if we leaf through the annual report of the Pension Orientation Council (Cor) which must be made public Thursday June 13. This reference body which brings together social partners, elected officials and specialists, estimates that in 2024, the pension deficit will amount to 0.2% of gross domestic product (GDP)has 5.8 billion eurosand will reach 0.4% of GDP in 2030 then 0.8% of GDP in 2070.
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Figures which, depending on your point of view, can lead one to say that the 2023 pension reform was useless or, on the contrary, that without it, the situation would be even worse. If in its report, the Cor does not resolve this debate, it points out some avenues for analysis. Let’s first look at retirement spending. They represent 13.4% of GDP and are expected to reach 13.7% in 2030 to decrease to 13.2% in 2070. Despite the pension reform, expenditure will initially increase faster than GDP due to an increasingly high number of retirees and an increase in average pensions. Then, as the number of retirees stabilizes, spending will decline, compared to national wealth.
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On the other side of the scale, pension reform, by making workers work longer, must bring more contributions into the coffers. It is, in fact, the main resource of the regime (66.6%). But this will not be the case. Le Cor estimates that the share of resources reaches 13.6% of GDP in 2023 (i.e. 385.6 billion euros) and should drop to 12.4% of GDP in 2070. One of the explanations is that the overall increase in contributions will be slowed down on the side of civil servants, due to the virtual freeze of their remuneration. Who says low increase in remuneration, also says low increase in contributions – a percentage of this remuneration – which enter the pension plan funds.
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One thing is therefore certain: the pension reform has not made it possible to structurally balance the retirement system. Without explicitly saying that a new reform is needed, the Cor sets out the adjustments necessary to restore the financial balance of the regime. If the choice falls solely on raising the retirement age to fill “the hole”, then “it would be necessary to increase this age to 64.4 years in 2030 and 66 years in 2070”estimates the body chaired by Gilbert This.
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An observation that goes against the grain of the proposals put forward by several parties for the early legislative elections. The National Rally, which came first in the European vote, calls for the repeal of the pension reform and a return of the legal age to 62 years or even 60 years for those who started working early. On the left, on the side of the union of the “Popular Front” which is in the process of being set up (bringing together the Socialist Party, the ecologists, France Insoumise and the communists), the promise is also to return to the 2023 pension reform. With disagreements that will still need to be clarified. While France Insoumise and the communists are in favor of returning the legal age to 60, the socialists and ecologists, during the presidential election, opted instead for maintaining this age at 62.
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Unpopular solutions
The cursor could however move. “I am in favor of the legal age being 60 for all French people, this means that those who started working early will be able to leave early”said the boss of the PS, Olivier Faure, on the set of the TF1 morning show, this Tuesday, June 11. Before specifying that the contribution period to obtain the full rate will not be the same for everyone, without giving more details. A point which will still have to be the subject of discussions.
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Another solution, no less controversial, mentioned in the Cor report: lower pensions or, at a minimum, make them evolve less quickly than inflation. If the executive mentioned between the lines the possibility in 2025 to revalue pensions below inflation, few political parties should risk putting forward this unpopular measure during their campaign. Last lever to improve the finances of the plan: raise retirement contribution rates. “An increase in the tax rate of 0.6 points would be necessary to balance the retirement system in 2030”, assesses Cor. An increase to which the President of the Republic Emmanuel Macron has always refused. La France Insoumise raised the idea, during the presidential election, of increase the contribution to the basic pension for income above 3,428 euros. Far from these political considerations, the Cor makes it clear that the figures put forward are not a proposal for reform and that they have “only an educational vocation”.
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