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France to increase retirement age to 62 in bid to tackle deficit

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  • France to increase retirement age to 62 in bid to tackle deficit

FRANCE - France's statutory retirement age is set to increase to 62, according to government plans unveiled today.

Under proposals outlined by Labour minister Éric Woerth this morning, the statutory retirement age will gradually increase from 60 to 62 by 2018.

Woerth said the move was necessary, as life expectancy had increased by three years since 1980, when the current retirement age had been agreed.

Further, the minister argued the move should allow the government to break even and combat a growing pensions deficit, with savings of €18bn being made.

He said these savings could not have been achieved simply by increasing the contribution period.

Philippe Desfossés, chief executive of ERAFP, the French civil service supplementary pension scheme, welcomed the reforms.

"All other things equal, this should increase the size of ERAFP and also further improve its solvency, which is already satisfactory," he said.

"However, these changes will occur only gradually, and it remains to be seen whether the actual retirement age will increase as much as the legal one.

"Furthermore, it should not be forgotten that this move, raising legal retirement age, is motivated by a life expectancy that keeps on increasing."

The announcement brings to a close months of speculation over the extent of reforms.

Without changes the retirement age, France's state pension deficit was expected to hit between €72bn and €115bn by 2050 in calculations made by the Conseil d'orientation des retraites (COR), the country's leading pension advisory body.

The reforms will go hand in hand with an already implemented increase in minimum contribution period.

Currently, at 40.5 years, it is set to increase to 41.5 by 2020.

COR had previously suggested that, without reforms, the minimum contribution period would have to be increased to 43.5 years by 2050 if pensioners wished to continue relieving a full pension.

Desfossés said he did not expect the announcement to change pension funds' investment patterns greatly in the short term.

"This regulatory modification does not materially change our investment objectives and constraints, though a more detailed analysis will be conducted during the annual asset/liability management review," he said.

Despite the announcement, all proposals still have to be agreed by Parliament, which is expected to address the issue in September.

 

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