French Pension Reform: You might want to read this

Dec 11, 2019 | Jeremy Goldfarb


French Prime minister Edouard Philippe

Global developments with knock on consequences (outright or hidden) are things I love to write about. What will likely be a lesser known news item on this side of the border could have longer term impacts down the road. The French government has elected to roll out a universal pension system over the next number of years. This will see the current system cut down from a total of 42 pension platforms (public).


There has been tremendous backlash as a result of this including strikes, demonstrations, jammed up metro lines etc. Nothing outlandish, but unrest for sure.


What's the bid deal?

The French pension system has been fragmented with better circumstances for some workers and less focus on universal benefit. Those under more favourable systems currently, object to the changes because they think pensioners will have to work longer for a better pension ( can you even imagine that??!) The proposal actually plans to be rolled out over time, so the only workers that will be affected completely by the new system will be born after 2022, a ways out yet.


interesting points:

  • One public pension system instead of 42 currently
  • Benefits indexed to wages, not inflation
  • New regime applies to everyone born from the start of 1975
  • Those who are born from 2004 will only contribute to the new system
  • Legal retirement age unchanged at 62, full benefits not available until age 64
  • Retirement age rises to 64 from 2027
  • Minimum pension of 1,000 euros a month from 2022 for those who worked a full career
  • Minimum pension pegged at, at least 85% of the minimum wage
  • Workers earning more than 120,000 euros a year will pay extra
  • Those who started work before 18 and those with “hardship” jobs, including night workers and nurses, will still be able to retire with full pension at 62
  • Prison guards, police officers and firefighters will keep their special 

Why do we care:

If you recall, I wrote recently about what savings it would take to earn a minimum wage in retirement these days. The numbers are shockingly high so the sooner you start encouraging your kids to save, the better. The reality is, without accepting a material change in risk profile (which is difficult for pension funds that have fixed obligations to meet), you are slave to the current interest rate environment which doesn't leave much to write home about.


Something has to give.........