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National Assembly approves reform of French retirement system

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The French National Assembly has approved new pensions reform in the latest of a long line of measures to shore up its beleaguered pay-as-you-go (PAYG) retirement system.

The changes to first-pillar social security pensions are “the first left-wing retirement reform in 30 years”, proudly claimed minister of Social Affairs, Marisol Touraine, referring to the popular but costly lowered retirement age from 65 to 60, granted by president Mitterrand after his 1981 election.

Since then, at least six basic pensions reforms have followed one after the other: Balladur (1993, lowering pension rights and increasing contribution periods); Fonds de réserve des retraites (1999, creating a buffer fund that never received the promised capital; Fillon (2003, creating an adjustable retirement age according to life expectancy; Woerth (2010, raising minimum retirement age to 62 by 2018 and up to 67 for retirees with incomplete contribution history); and minor changes in December 2012, shortening the horizon for the new 62-67 retirement age bracket to 2017 instead of 2018.

The new reform essentially covers five areas.

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First has been a lengthened contribution period for receiving a full social security pension.

People born after 1973 will have to contribute 43 years compared with 41.5 years for people born in 1956.

The minimum contribution time will also be harmonised to 43 years for public employees.

Second will be higher contribution rates.

Employees and their employers will see the rate of their contribution on wages raised by 0.15 percentage points in 2014, with an additional 0.05 points in 2015, 2016 and 2017 – or 0.3 percentage points by 2017 as a whole.

Third will be retirees’ share of the burden.

As a “measure of justice”, retirees will pay their part of the French retirement rescue plan.

Their pensions’ increase to keep pace with inflation is to be frozen for six months, with the April rise being postponed to an October schedule.

Also, the 10% retirement bonus granted to retirees who had three or more children will now be taxed as other pensions are.

Fourth will be contributors’ relief and compensation.

To compensate for the bad news, the law will help some of the least favoured workers to get a better pension.

About 5m people facing hardship in their daily work hardness – working night shifts, heavy lifting, etcetera – should be able to retire up to two years earlier than others thanks to a ‘hardness account’.

Part-time workers will also be able to get a full quarter of retirement contribution when they work 150 hours (as opposed to 200 hours now), a measure helping women’s pensions.

And fifth will be the government’s increased control over retirement institutions, with a view to “harmonising” the French system.

As a first step, it said it would take over CNAVPL – the Caisse nationale d’assurance-vieillesse des professions liberals – one of the independent workers’ schemes, due to a change in its director-designation process.

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