Future shock

After a few months of fuss and bother, France’s President Nicolas Sarkozy managed to push through his pension reforms rather rapidly towards the end of 2010, raising the standard French retirement age progressively over the next few years from 60 to 62. The French are rather partial to a demonstration, not to mention a strike or two, but as the initial anger petered out it seemed greater numbers came to accept that some sort of action was necessary to close the country’s ever-widening pension fund gap.

After all, France is not alone. The UK is looking to increase the retirement age to 67, the Italians are now at 65 and even the Greeks have accepted they will have to work until 63 if they want to fund their old age.R

R�partition

Part of the current pension funding problem in France stems from the choice of a r�partition system. A relatively immediate redistribution method, the monthly contributions paid into the State-run pension funds are used during the course of the same year to pay the retired population their monthly pension. It is rather like a pan-generation

‘pay as you go’ scheme.

The trouble is, with more people living longer, a greater number of active workers are needed to fund those who are retired. Add into the mix an economic downturn resulting in higher unemployment and you have a slight supply and demand hiccup. Not that the UK-style so-called ‘capitalist’ pension system, which involves longer term investment in financial markets, is faring any better at the moment.Besides, according to government websites, r�partition creates an ‘inter-generational solidarity’ between the old and the young, the working and retired populations.

Retirement schemes

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There are three principal retirement plan categories in France. Most people (around 72%) fall under the private sector employee scheme, known as the r�gime g�n�ral.

The second category encompasses the various special retirement plans for public sector workers, including civil servants, employees of government-owned companies and some former State-owned companies such as utility giants EDF and GDF. Just over 18% of workers are in one of these schemes. These r�gimes sp�ciaux often offer favourable retirement conditions, allowing workers to retire earlier either on full or part pension depending on the level of contributions. For example, SNCF train drivers and miners can retire as early as 50.

Finally, there are the self-employed retirement plans known as les r�gimes des non-salari�s. Business owners, artisans, farmers and those who work in what are called the professions lib�rales such as lawyers, architects, private teachers or translators all come under the various self-employed sector schemes – currently representing just under 10% of the population.

As pension reform continues, however, these different schemes are likely to merge. Last year’s review already tabled a universal retirement plan, aligning all the schemes with the r�gime g�n�ral from 2013. Then again, there is the small matter of a presidential election before then, so nothing is certain.

Contributions

With France being historically – and at heart – a socialist country, in contrast to the capitalist model that has shaped the UK for the past 30 years, mandatory contributions into the social welfare structure are rather hefty, including those for retirement.

Standard percentage contributions by employers are also obligatory – and greater than the employee’s payments – which is one of the reasons it has proved much more difficult to stimulate entre-preneurship in France over the years. (It is not uncommon for the actual cost of an employee to an employer to be double the salary paid.)

There exist two levels of obligatory contributions for both employees and employers. The basic contribution (la retraite de base) consists of two parts: for the employee it is 6.65% of the salary up to a ceiling of €2,946 plus a further 0.1% of the total salary. For the employer, it is 8.3% of the salary up to €2,946 plus a further 1.6% of the total salary.

The second level is the retraite compl�mentaire, which is more complicated. Put simply, blue collar workers (non-cadres), make contributions of 3.8% on lower earnings plus a further 8.9% on higher earnings. The employer pays 5.7% and 13.3% respectively.

Contributions for white collar workers or managers (cadres) are further broken down but essentially amount to 3.8% on lower earnings plus 7.7% on higher.

Employer contributions for the second level are generally 5.7% on lower earnings and 13.3% on higher earnings.

All the separate contributions – as well as the multitude of other social security payments – are deducted from the monthly salary at source and are indicated individually on the wage slip. Hence the wage slip is akin to the average utility bill in that you need a degree in French wage slips to understand it all!

As well as these mandatory payments, everyone has the option to take out a private pension, as in the UK, either affiliated with their company or on an individual personal basis.

Clocking off

The upshot of all these pension obligations is that when French people retire they expect to be well looked after – and indeed, increasingly, they are.

The minimum pension was replaced in 2006 by the Allocation de Solidarit� aux Personnes �g�es or ASPA (note that word solidarity again) which primarily simplified several different allocations into one payment. The ASPA effectively ensures that anyone whose pension contributions together with any other income resource don’t reach the minimum pension level, receives a complement to take it up to this level.

Today, the maximum monthly ASPA payment for a single person living alone is €742 and for a couple it’s €1,181. So, for example, if your pension contributions combined with any other income resource only entitle you to €400 a month, your ASPA complement will be €342.

The Sarkozy government has been good to the grey voter and by next year the maximum ASPA benefit will have increased by 25% in just a few years. The good news for those thinking of retiring to France is that it is available to anyone who has been resident in the country for a minimum of six months. It is worth noting, however, that the government reclaims ASPA benefits on the death of the recipient if the net value of his or her estate is worth more than €39,000.

Health cover

When it comes to health insurance, evidently retired individuals no longer pay the mandatory social security health payments as they did during their working years. These contributions have entitled them to free basic healthcare in old age. However the majority continue to maintain a mutuelle – private health insurance – to cover the top-up fees for French healthcare and to pay for treatments not covered by the national social security system.

Quality and quantity

In general, French people enjoy an active and fulfilling retirement. They are mostly secure financially, and family and community ties remain strong in many areas of the country ensuring a level of social activity and protection, especially in older age.

Plus, with a history of many French people enjoying early retirement, not to mention the numerous expat early retirees settling in France, there is a definite sense of joie de vivre for most people about retiring and making hay while the sun shines. And whether it really is to do with the r�partition system or not, there does seem to be a certain solidarity between the active working population and those who are retired.

Very often, retired people are active in the community and take on valued voluntary roles which may also be a factor in what is without doubt, in any case, a mutual inter-generational respect. LF