France unveils pensions reform, ignores European Commission
FRANCE – The French government has unveiled its proposal for tackling the growing deficit within the first-pillar pension system, which could reach €20.7bn by 2020, but ignored many of the recommendations made previously by the European Commission.
Among the measures announced by François Hollande's government to tackle the deficit in the pay-as-you-go system, one aims to extend the length of contributions – from the current 41.5 years to 43 years by 2035.
Additionally, both employers and employees would see their social contributions increase over the next four years – by 0.15 percentage points in 2014 and 0.05 percentage points in 2015, 2016 and 2017 – to reach an overall increase of 0.3 percentage points by 2017.
The government will also ask companies to finance special accounts for "hardship conditions at work".
According to the government, these special accounts, which will be introduced in 2015, will help employees performing heavy work to learn new skills, work part-time at the end of their professional career or retire earlier than the legal retirement age.
However, some of the measures suggested by the European Commission earlier this year – namely that France should increase the statutory retirement age and full-pension contribution period – have been ignored.
Similarly, the Commission's recommendation to avoid an increase in employers' social contributions has also been dismissed.
Another measure recommended by both the Commission and a French pensions advisory panel in June – which sought to limit indexation – have also been watered down.
Instead of revising the indexation rules, which could have led retirees to see their pensions fall by 1 percentage point compared with inflation, Hollande's government finally decided to move the adjustment of pensions from April to October.
The move could help France save as much as €600m by 2014, according to the government.