François Bayrou's announcements: pension de-indexation and revision of the tax allowance, a double whammy for retirees

From the start of his budgetary "moment of truth" on Tuesday, July 15, François Bayrou sought to be reassuring: "In 2026, pensions will not decrease." This was only to better explain, a few dozen minutes later, that they will not increase either, at least not when it comes to the basic pension of private sector and civil service retirees. This is indeed a consequence of the "blank year" announced by the Prime Minister, which will result, if his budget is adopted, in a total de-indexation of retirement pensions with respect to inflation. In sharp decline since last year, inflation is expected to be around 1% in 2025, according to projections from the Banque de France.

In reality, a pension de-indexation does indeed correspond, in practice and regardless of what François Bayrou says, to a relative reduction in pensions. He has even half-heartedly acknowledged this, referring to "a very significant effort [...] required of everyone," but "temporary." Thus implying that in 2027, if he is still in power, the law will be reapplied.

The threat of under-indexation has been looming ever more concretely in recent weeks over the 17 million retirees. The union and employer organizations sitting within the pensions "conclave" had more or less agreed that such a measure, repeated for five years in a row, would constitute the essential path towards a return to balance for the system by 2030. Last week, this path was also favored by the Pensions Monitoring Committee , a group of experts attached to Matignon. Its recommendation is to implement under-indexation of around 1.9 points of GDP in total over the next five years. In 2026, according to its estimates, an under-indexation of 0.1 points of GDP would represent a saving of €300 million. Adjusted for 1% inflation, the savings would therefore be €3 billion.

In the midst of a "blank year" that would also target social minima such as the RSA or the adult disability allowance – but not unemployment benefits, determined independently by Unédic – this de-indexation of pensions presents a considerable political risk for the Prime Minister. His predecessor, Michel Barnier, was censured in December 2024 by the left and especially the National Rally for having carried through to the end a measure of partial under-indexation of pensions .

François Bayrou mentioned another potentially more consensual measure, which would consist of revising the 10% tax deduction that all retirees receive on their income declared to the tax authorities. While the Prime Minister joked that this deduction for "professional expenses" makes no sense in the case of a retiree, its history is in fact the subject of debate. On its website, the Unsa (Union for a Popular Movement) explains that Raymond Barre's government introduced it in 1978 in particular to compensate for the fact that retirees, unlike working people, cannot under-declare their pensions. In other words, they cannot cheat the taxman.

This tax reduction represented a shortfall for the public treasury of nearly €4.5 billion in 2023, according to the Court of Auditors . The Prime Minister suggested that it be "replaced by an annual lump sum." Later that evening, on the France 2 news, Economy Minister Eric Lombard specified that the amount of this lump sum would be €2,000 annually.