“The Presidential Lab”: Should Retirement Pensions Be Re-indexed for Inflation?

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French retirees are among the best in Europe. How many presidential candidates or heads of state have fueled this argument in recent decades to try to legitimize accounting reforms and reduce the budgetary enormity of pensions: 327.9 billion euros, or 13.5% of GDP, in 2019 (As per the 2021 report DREES which depends on the Ministry of Health).

Several studies support the idea that French retirees won’t have to complain. For the poorest of them, France has the lowest poverty rate in Europe at 9.6%, according to Eurostat data, just ahead of Norway (8.6%) and Luxembourg (6.9%). Evidence of the relative effectiveness of the French pay-as-you-go system in protecting the elderly from poverty, even if strong inequalities exist.

what are we talking about?

However, from time to time, a question arises on the table: about the purchasing power of gray temples and the revaluation of pensions. As a reminder, the average pension for all plans according to DREE is €1,503 gross per month, from which all Social Security contributions must be withdrawn (ie about 15% less on the amount of the pension payment net).

While pensions increase every year, the standard of living of 16.7 million pensioners has declined over time. How much? CGT has grown by 10% in the last ten years. However, it is difficult to assess it accurately. But an addendum to the Social Security Financing Bill (PLFSS) for 2022 sets out a black-and-white decline in retirees’ purchasing power since 2010. What do we study there? “Pension from the general plan (security part)Civil Service and Agirc-Arrco (additional for managers and employees) The guarantee of liquidation in 2010 is less than their purchasing power in 2021 that they had given during their liquidation in 2010.” In other words, losses in ten years. We now count the number of demonstrations by retirees who condemned it Can’t… In 2021 alone, they marched in September, October, November and December to demand an increase in pensions. A topic – the purchasing power of retirees – is at the center of the Yellow Vest movement and the great debate of 2019. is also.

What is debate?

Beyond the reforms, for ten years, managers of supplemental plans (especially those of Agirc-Arrco), like those of managers, have become habituated to activating a lever that allows for prudent savings: the annual reappraisal of pensions. Since 1987 the rule has been to index retirement pensions to inflation, ie average consumer prices excluding tobacco. However, between 2011 and 2021, “the purchasing power guarantee period provided by Article 27 of the Act of August 21, 2003 has not been reached”, confirms this document of MPs affiliated with the PLFSS. It was the pensions of Agirc (managed by social partners) for the first time that dealt the first blow to this use in 2011 with inflation-less revaluations. In 2014, the government of Manuel Valls decided to limit half the revaluation of general system and public service pensions to over 1,200 euros and freeze them for a year and a half, with the key to a forecast of ‘1.3 billion’. Euro saved. A dropout has increased for all retirees from 2017 onwards, regardless of plans, under the influence of various measures set by douard Philippe’s government: under-revaluation, freezing but also calendar shifts.

Why are reset dates changing?

Date of revaluation of pension… This is another means of creating economy on pension. With each date change, savings are at stake because there is no catch in the months separating the old date from the new one… All governments, right and left alike, have resorted to it recently. Prior to 2009, the normal practice was to stick to annual inflation figures and the date for revaluation of civil servants’ pensions was fixed as January 1. Between 2009 and 2013, the calendar was pushed back to April 1 every year. Then in 2014 the date was changed to 1 October. In 2018, the revaluation scheduled for October 1, 2018 has been postponed this time…. January 1, 2019. Again in 2020, but this time the Social Security funding law introduces “differentiated reappraisal.” Pensions, gross per month less than 2,000 euros, have been recalculated by 1% for all plans inclusive and a limited increase of 0.3% for those above 2,000 euros. The same is the case with supplementary pension plans.

What is the burden on the amount of pension also?

Beyond indexation and the floating calendar, well-known Social Security contributions also weigh in on pension levels… used to peel retirees, as they burden the pension amount (between 10 and 20%). . Since 1995, they have continued to pile up and grow. With Pell-Mail: The Generalized Social Contribution (CSG) created in 1991 and has five different rates today; Social Debt Repayment Contribution (CRDS) since the late 1990s; Additional Solidarity Contribution for Autonomy (CASA) since 2013. In addition, retirement pensions from supplemental plans are subject to health insurance contributions at the rate of 1%.

What parameter has to be shifted to restore purchasing power?

Today’s main topic is indexation of pensions in inflation. There is technically no impediment to re-establishing this simple ten-year rule in France while many countries continue to implement it. This is a political decision, given that most efforts should not be undertaken by retirees alone. In a pension reform project by Jean-Paul Delevoy, titled “Towards a Universal System”, the former High Commissioner also put forward another hypothesis: reintroducing pensions at the average wage, a rule that was abandoned in 1987. “This would make it possible to maintain a constant rate of acquisition of rights over the course of an average person’s career,” he explained. “. Some countries, such as Germany, Belgium or the United Kingdom, have done so.

How much will re-indexing cost?

It is impossible to answer this question as it depends on the level of inflation at the time when the decision to reinstate indexation is taken. Same goes for indexation on pay, which will be calculated on the average pay as on the date of application.

What are the candidates saying?

Not much at the moment, if we are to believe each other’s statements. The only candidate to present the problem of listing is the last one in the presidential race. Nicolas Dupont-Aignan (Debout La France) is in favor of “an index of pensions on inflation”. As for François Asselineau (Popular Republican Union), his suggestions are very vague as they ask for “re-evaluation of pensions every year” and “adjustment to inflation”.

The biggest focus in this campaign is on small pensions. In other words, the level of the safety net is able to ensure that the most precarious workers or those who have not done enough work do not fall into poverty for the rest of their lives during retirement. A campaign promise from candidate Macron in 2017 on the menu of the Delavoye reform – bringing small pensions at 1000 euros for those who have all their quarters – has not seen the light of day. This could be reflected in the 2022 program as well as a reassessment on wages.

On the right, candidate LR Valerie Pecres recommends “guaranteeing in 2030, for all those who have worked all their lives, a retirement pension of at least one net minimum wage per month”. Marine Le Pen, for RNs, offers “a universal pension of a minimum of 1,000 Euros, regardless of contribution period”. Reconquest candidate Eric Zemour gave him no answer: “I’m not Santa Claus, you see”.

On the left, Insoume’s candidate, Jean-Luc Mélenchon, wants to “bring at least to the level of the minimum wage – reparations – all pensions for a full career”. Anne Hidalgo (PS) intends to “raise the minimum old age net amount to EUR 1,000 and the minimum contribution to EUR 1,200”. Fabian Roussel for the PCF “claims that there is not a single pension less than 1,200 euros for those who have a full career”. As for the candidate of Europe Ecology-The Greens, Yanik Jadot, he dismissed the question.

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