French pension reform 'inadequate and unaffordable', says CSIS
FRANCE - France is developing retirement systems that are both inadequate and unaffordable, according to experts from the Centre for Strategic and International Studies (CSIS).
According to Neil Howe and Richard Jackson, France has enacted pension reforms that drastically reduce the benefits future retirees can expect to receive.
The two experts based their study on the Global Ageing Preparedness (GAP) index, which aims to assess the progress made by countries worldwide in preparing for global ageing.
The GAP index shows that the income of middle-class elderly people in both countries is due to fall by around 15% relative to the income of middle-class working-age adults over the next three decades.
In their report, they said: "France and Italy spend so much on old-age benefits and have so little fiscal room to accommodate future benefit growth that, even after reforms, they remain on a fiscally unsustainable course."
Stéphane Hamayon, director of economic studies at French consultancy Harvest, agreed and said he expected the pension deficit to grow even further over the next three decades in France.
"In spite of the pension reform - which aims to push back the legal retirement age from 60 years to 62 years - there is clearly a financing problem in the private pension system," he told IPE.
"The problem will be even deeper over the next decades, as unemployment is also likely to rise."
According to Hamayon, the predictions made by the government to bring the pension deficit back to €24.2bn in 2040 are unrealistic.
"The official statistics are based on an unemployment rate of 4.5% in 2018," he said. "If we make the same calculations based on an unemployment rate of 8%, the current rate recorded in France, we notice the pension deficit in the country will be twice higher in 2040 - at 43.8% - than in the official scenario presented by the government."
Hamayon also said the deficit in the public pension system was even more worrying since the reforms introduced in 2003 and 2010 failed to modify the conditions adopted by several schemes, considered as 'special regimes'.
Therefore, these schemes have neither been affected by the change in the legal retirement age nor by the cut in pension benefits, according to Hamayon, and have retained their benefits.
"Furthermore," he added, "the public sector is facing an important demographic problem due to the lack of workers to help finance current pensioners' benefits, which puts additional pressure on the pension deficit."