In a quasi-final version of its annual report, which must be examined by its 41 members this Thursday June 11the Pension Orientation Council (COR) is significantly revising its financial projections upwards for the decades to come. According to the information revealed, the financing need of the pension system could reach up to 2.4% of GDP in 2070against 1.4% in previous projections. Concretely, the system would then have to find several tens of billions of additional euros each year to finance the pensions paid to retirees.
The observation is all the more striking as the financial situation already appears to be degraded in the short term. According to the COR, the system would show a deficit of 5.1 billion euros in 2025either 0.2% of GDP. However, the organization does not foresee any major deterioration of the accounts in the coming years. If the suspension of certain measures resulting from the 2023 reform represents a cost estimated at 1.8 billion euros over a full year, other factors partly offset this impact, notably higher net migration than expected and slower growth in life expectancy than expected. It is especially in the long term that the outlook deteriorates.
Fewer births, more retirees: the equation becomes more complicated
This deterioration is explained above all by a change in demographic context. To establish its new projections, the COR relied on the latest demographic report from INSEE, published at the beginning of the week. This now retains a fertility hypothesis of 1.45 children per woman, compared to 1.8 in the scenarios used so far.
This difference may seem limited at first glance, but its consequences become considerable over the course of several decades. With fewer births, the number of future workers called upon to finance pensions automatically decreases. At the same time, the population continues to age. According to INSEE, France has 5.8 million additional people aged 65 or over by 2070while the total population would reach a peak around 2037 before starting to back up.
For a system based on distribution, where retirees’ pensions are financed by contributions from active workers, this development gradually modifies the financial balance. In 2040, France should have nearly 49 people aged 65 or over per 100 people aged 20 to 64compared to around 40 today. In other words, the number of contributors is growing more slowly than that of retirees.
Avenues studied to limit the deterioration of accounts
The COR report does not propose a turnkey reform. However, it highlights the main levers likely to improve the balance of the system. The first consists of increasing resources, particularly through contributions. The second aims to contain the expensesfor example through the methods of revaluation or calculation of pensions. The third is based on extending the duration of activity and improving the employment rate of seniors.
This issue of senior employment is regularly highlighted as one of the levers likely to sustainably improve the system’s accounts. In a recent interview for Capital devoted to retirement strategies, François Irmann, retirement expert, recalled that improving the employment rate of seniors remains one of the main challenges of the system. “It’s a totally schizophrenic situation: we want to improve the employment rate of seniors, but when there is restructuring, it is often them who are pushed out. » For the expert, progressive retirement or even combined employment and retirement constitute avenues for extending the activity of certain employees while more gradually supporting their exit from the labor market.
The report also relaunches reflection on the different sources of pension financing. Without calling into question the principle of distribution, some economists argue for a greater role for retirement savings in order to supplement the future income of retirees. Others consider that the essential response must involve employment and growth.
These projections also fuel the debate on the preferred solutions. Where the right generally defends the continuation of the reforms initiated, the left places more emphasis on the search for new recipes. A divergence which illustrates the difficulty of finding consensus in the face of a challenge that is now as much demographic as it is financial.
