FRANCE - French private pension scheme Agirc-Arrco has signed an agreement to introduce a reform aiming to cut its deficit by more than 60% by 2030.
Agirc-Arrco, one of the 37 compulsory private pension schemes in France, has a deficit of just over €119.2bn.
With the agreement recently signed by the social partners, the scheme hopes to cut that to around €46.2bn by 2030.
Pierre Chaperon, cabinet director at Agirc-Arrco, told IPE: "The measures adopted by the social partners match the two reforms the government introduced in the public pension system in 2003 concerning the length of contributions and in 2010 with the legal retirement age.
"Even though nothing obliged the scheme to adopt this reform, the social partners, who are in charge of managing Agirc-Arrco, agreed to sign the agreement to reduce the deficit the scheme is currently facing."
The agreement was signed in March by six trade unions: Medef, CGPME, UPA, CFDT, CFTC and CGT-FO.
Under the new reform, Agirc-Arrco will extend the length for contributions paid from the current 40 years to 41.25 years in total. It will also push back the legal retirement age from 60 to 62 years.
With this measure, the pension scheme plans to save €94.1bn on its current costs by 2030.
Chaperon said: "The reform of the system is based on life expectancy, which continues to increase over time. France, like several other European countries, is dealing with an ageing population and a low birth rate.
"People have to work longer to maintain an equilibrium between the period of employment [two-thirds] and the retirement period [one-third].
"That's why the French will be allowed to retire only if they have paid their contributions for more than 41 years."
Additionally, the reform plans to amend several conditions implemented in the past, one being related to the number of children raised.
Under the previous system, parents with at least three children saw their pension allocation increase by 8%, while parents with at least seven children were enabled to gain a 24% increase.
The new reform aims to lift this to a uniform 10% for all families with at least three children.
In spite of the new measures, the system will remain in deficit by 2030.
Cécile Vokleber, who is in charge of coordinating with other pension schemes, said: "Social partners agreed to fall into line with the reform of the public system until 2018. From 2015, they will decide whether they need to amend the reform and introduce new measures to get rid of the deficit."
She added that Agirc-Arrco had accumulated a reserve over the years, which had allowed it to stay afloat. However, Agirc-Arrco has started using this fund to finance its deficit.