Pensions: five levers to save the pay-as-you-go system

The unions are unanimous in calling for the 2023 reform to be abandoned and for the legal retirement age of 62 to be returned. "The slogan '64 means no' has not aged a day," assures Marylise Léon, the general secretary of the reformist CFDT. The unions also regretted that, in its report of February 20, the Court of Auditors only calculated the cost of lowering the retirement age to 63 (13 billion in 2035). In the event of a return to 62, its president, Pierre Moscovici, would have put forward the figure of 10 billion euros in the first year.

Sophie Binet, general secretary of the CGT, a protest union, believes that "repeal of the reform" would be "entirely financially sustainable" and could be financed through social security contributions generated by genuine gender pay equality and by using companies' financial revenues, profit sharing and participation.

"We will not be complicit in this game of deception," warns Patrick Martin, the president of Medef, which brings together large companies. "At the very least, we must preserve the retirement age at 64, " he assured the JDD on Sunday. "If we were realistic, we should perhaps even push it a little further." According to the Court of Auditors, moving to 65 would bring in between 10.6 billion and 17.7 billion.

The employers are not unanimous, however, and the Confederation of Small and Medium-Sized Enterprises (CPME) has said it is open to discussing a review of the 64-year age limit, provided that "an automatic mechanism" is devised indexing "the retirement age to life expectancy" and making it possible to "avoid a political debate each time".

The idea is, however, rejected by the unions. "Since 1993, a long series of reforms has led to the retirement age being pushed back more quickly than life expectancy gains, and therefore the length of time spent in retirement is decreasing," notes Sophie Binet.

► Increase the contribution period

The social partners could use the lever of the contribution period. Increasing it from 43 to 44 years would bring in 9.7 billion.

Here again, the unions are reluctant, even if the CFDT has always found it fairer to act on the contribution period than on the legal age. At its 2022 congress in Lyon, the debates on the subject were tense but the members agreed that the extension of the contribution period could not "be done without extending to more workers the rights linked to compensation for hardship".

The leading French union has therefore logically made hardship a major subject of negotiation. The CPME would not be hostile to developments: there could be common ground there.

► Increase social security contributions

The unions' preference goes to the lever of social contributions. "The effort must be balanced and fair," said Cyril Chabanier, president of the reformist Christian union CFTC, on February 22 on BFM. "Until now, we have only asked for it from employees: we must also ask for it from companies."

The Court of Auditors, however, warns of the negative impact on the economy of a one-point increase in social security contributions: bringing in 4.8 to 7.6 billion on paper, the measure would result in the loss of 32,000 (if employee contributions alone were affected) to 57,000 jobs (if employer contributions alone were affected). Estimates "clearly established on the basis of an immediate one-point increase in the contribution rate in one year" , notes Sophie Binet, stressing that the CGT is proposing increases "smoothed over ten years" , "entirely sustainable".

"More broadly, we must also put on the table the whole issue of reductions in contributions which weigh on the resources of our social protection system," adds Christelle Thieffinne, national secretary for social protection at CFE-CGC, representing management.

Unsurprisingly, employers are ruling out any increase. " We have never had so many business failures , " warns CPME President Amir Reza-Tofighi. And he adds ironically: "Increasing contributions is a solution to have even more."

► Under-index pensions

Rather than increasing the system's revenue, the CPME would prefer to play on expenditure and proposes to "de-index the increase in pensions". This is already the case for private sector supplementary pensions , indexed not on inflation but on the average salary affected by "a sustainability correction coefficient of 0.40 points" .

The 2.2% increase on 1 January 2025 will cost the pension system €6.5 billion. Over a full year, under-indexing pensions by one point below inflation would save €3 billion.

The unions are scattered here. "Pensioners are not rich, their pensions amount to an average of €1,600," insists Sophie Binet, warning against "a recessionary effect on the economy." "We can only make the wealthiest 50% of pensioners contribute," judges Cyril Chabanier, of the CFTC.

The Court of Auditors also points out that retirees consume less than other beneficiaries of social transfers, saving "a significant fraction" of their pension: "Their average savings rate is around 25% of their disposable income in 2024."

CPME President Amir Reza-Tofighi also proposes to make retirees contribute by aligning their CSG rate with that of active workers, thus increasing it from 8.3% to 9.2%. For its part, the Medef had already put forward the idea of ​​returning to the 10% reduction they benefit from in the income tax framework: mainly benefiting the wealthiest, it costs 4.6 billion euros.

► Introduce a dose of capitalization

To address the demographic imbalance of the pay-as-you-go system, the CPME proposes adding "an additional level of capitalization" : "mandatory savings" , "managed by social partners" and financed by "increased working hours". The president of the CPME thus mentioned "the salary of three public holidays per year" , or "one hour more per week" .

For their part, the unions are divided. "For the CGT, this is a red line, we will not accept entrusting our retirement system to finance and letting them play poker with our rights," assures Sophie Binet. "We can discuss a collective system which, without eliminating the pay-as-you-go pension, would form an additional level," tempers Cyril Chabanier, who recognizes that this already exists "in the civil service and many large companies."

According to Bercy, 11 million employees benefit from a retirement savings plan, accumulating nearly 119 billion euros in assets. To this must be added 4.5 million civil servants benefiting from the additional civil service scheme (RAFP, 43 billion in net assets) and where unions, including the CGT, sit on the board of directors.

"We were against it, but we had to be there," corrects Denis Gravouil, confederal secretary of the CGT responsible for social protection, for whom "everything that is taken by capitalization is something that is wrong with the distribution system."

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Pay-as-you-go pensions threatened by deficits

In 2023, pension system expenditure amounted to 388.4 billion euros, or 13.8% of GDP, including 376.8 billion in benefits paid to 17 million direct pensioners and 4.4 million recipients of a survivor's pension.

The system's deficit will reach 6.6 billion euros in 2025, according to the Court of Auditors. It should remain stable until 2030, before experiencing, due to the demographic imbalance linked to ageing, a "clear, rapid, increasing " deterioration to reach 15 billion euros in 2035 and 30 billion euros in 2045.

The accumulation of deficits would lead to an increase in the general scheme's debt of 350 billion euros in 2045, and of more than 120 billion euros for the fund of local government and hospital civil servants.