Pensions: choosing the contribution period will worsen deficits


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              Pensions: choosing the contribution period will worsen deficits                </strong>

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                August 30, 2019 •

                      Sandrine Gorreri

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                <p style="text-align: justify;">The head of state has chosen to defuse the crisis over the pension reform by declaring, since Biarritz, his preference for a reference to the duration of contribution rather than an age of equilibrium set at 64 years. Although this reform has not been launched to save money, pension plans are not in a sustainable equilibrium situation, far from it. The Minister of Public Accounts, Gerald Darmanin, reminded RTL today that the pension system deficit will still be € 15 billion in 2025 (figures Cor). Postponing the legal age would have saved three times more savings than lengthening the contribution period (14 billion in 10 years against 3 billion). By choosing this option, Emmanuel Macron makes the return to financial equilibrium even more hazardous.</p>

<p style="text-align: justify;">The head of state relaunched the debate on pensions by speaking at the end of the G7 Biarritz during a television interview.</p>

To sum up his remarks, let us say that he insisted a lot on the negotiations that were going to open between the social partners and the government, repeating several times that nothing was decided. He denounced a pension system that had become unfair over time, which he rightly described as a corporatist.

Speaking on the issue of the age of equilibrium, he recalled that "it was the Delevoye report that spoke of staggering the retirement age, which it did not find fair for those who started to work at age 16, who have fewer degrees, and who have often worked in difficult jobs. " It would also be ineffective since, according to his words, "we are still in an economy where there is a lot of unemployment, notably senior unemployment" where "people would be told to stay unemployed longer".

The conditions for the implementation of the new system as seen by Emmanuel Macron, were specified:

  • "I want our new regime when it comes into effect in 2025, be financially balanced";
  • "This system must be fair in terms of contribution: I prefer an agreement on the duration of contribution rather than age".

These declarations are almost the first position taken by the President of the Republic since the presidential campaign, the main reason being the desire not to touch the legal age (62 years) and the commitment of € 1 contributed must provide the same rights for all ".

The position of the head of state differs from the recommendation of Jean-Paul Delevoye as expressed in the report submitted in July to the government, which should serve as a basis for negotiations:

A full rate age to guarantee an optimal pension (extracts from the Delevoye report)

In the universal system, the device of the full rate will be kept, matched, as today, a haircut and a premium.

This full rate could either be a function of the duration worked as today (individual reference), or identical for all (collective reference). It is proposed to retain the second option, namely a full full rate age for all, because for the High Commissioner, this option is the only one that is really compatible with the objectives of the universal system.

This age of the full rate is one that balances pension funding, ensures the strength of the system and guarantees, individually, a satisfactory retirement.

Concretely, the age of the full rate is the one that ensures and maintains the equilibrium return of the pension system between generations, that is, the relationship between the service value and the value of the pension. acquisition of points. Thus, the return of 5.5% is obtained when the insured reaches the age of the full rate of his generation. If the insured decides to leave before this age, the yield will be lower and if he decides to leave after, the yield will be better.

For fixing this age of the full rate at the start of the reform, it is proposed to reproduce the average starting ages at full rate in 2025 currently projected, ie 64 years.

A piloting of the age of the full rate to take into account the evolution of life expectancy and the lengthening of the duration spent in retirement

The age of the full rate will be a lever for steering the pension system. Its evolution will have to take into account the evolution of life expectancy over generations.

This age will advance more or less quickly, if not stagnate, if life expectancy stops progressing. In the absence of a decision by the social partners, taking into account the evolution of life expectancy will result in an average advancement of the full rate age so that life expectancy gains are shared at 2/3 in active life and 1/3 in retirement life.

This approach respects the framework that was already provided for in the law of 21 August 2003 on pension reform.

Recall that the proposal to set an age of equilibrium at age 64 was therefore justified according to Jean-Paul Delevoye by the fact that it is already the average age of liquidation to the general scheme (63.4 years out of early departures).

If the head of state has chosen to stand out from Jean-Paul Delevoye and intervene very early in the debate it is certainly because the mobilization is growing against this reform. All the unions of employees expressed themselves against this age of equilibrium, including the CFDT, which also supports the principle of reform towards a universal pension system. FO and CGT call for strike respectively on 21 and 24 September next. South-Rail is also calling for a strike on September 24 fearing a decline in railroads pensions of 20%. RATP, for its part, is calling for a strike on 13 September.

Added to this is the anger of certain categories of civil servants: nurses already mobilized by the emergency strike and who protest against the impact that the reform will have on their pensions. Teachers also very mobilized as each school year. It will not be surprising that these professions were cited by the Head of State: "there is a lot of concern, I think teachers, nurses, or caregivers, if we apply the changes planned mechanically, these professions will be harmed "; "There will be no pension reform until we have built a real transformation of these professions.

Liberal professions strongly mobilized against rising contributions

Other mobilizations are planned for the liberal professions that will be heavily penalized by the reform: the Delevoye report proposes to converge their contributions to those of employees (about 28%). An unbearable level for many professions. The report conceded an adjustment with a rate of 28% up to 1PASS and a tapering off beyond. But for the CNBF it's still too much to organize a day of mobilization on September 16th. Even for the first installment this corresponds to a doubling of their contribution. The lawyers will be joined by the liberal nurses and probably some unions of liberal doctors. The same problem for the farmers: the rural coordination fears this increase while the FNSEA supports it. The airline pilots and aircrew will also join the movement who fear the disappearance of their complementary pension fund (CRPN).

What will be the impact of the choice of head of state?

Still, the presidential statement does not clarify everything: is it an identical contribution period for all, knowing that this contribution period is expected to increase under the effect of the reform Touraine (166 quarters for the 1957 generation up to 172 quarters for the 1973 generation)? Will we go beyond the 172 quarters?

It should also be noted that the recommendations of the Delevoye report were not so unfair, since even with the setting of an age of equilibrium at age 64, the long career system must be maintained with a start at age 60 for those who started before age 20. years. Assets that started working young would therefore be spared. It can also be recalled that people who started working young will have accumulated points for a longer time.

The report also proposes a generalization of the hardship account extended to officials and employees of special schemes.

The reasons for early departures are already common even if their distribution is not the same according to the plans as can be seen in the graph below:

These data come from the DREES, which states that in the civil civil service of the State, one in three retirees of the 1950 generation is eligible for early retirement in the active category, and three out of ten retirees are eligible for early departure for the active category at CNRACL (local and hospital officials).

We should therefore not multiply the reasons for early departures, at risk, as Jean-Paul Delevoye said, to weaken the performance of the system, in the clear to lead to a decline in pensions especially as the head of state As stated, the system must be financially balanced when it is implemented in 2025.

We can rely on previous reforms to say that raising the legal age and lengthening the contribution period do not have the same impact. In a DREES study cited by the COR published in 2017, the difference in impact is graphically measured:

Reading: all the reforms that took place between 2010 and 2015 would lead to an improvement of 1.51 points in GDP in the financial balance of all the plans studied in 2040, of which 0.37 points would be attributable to the increase from 60 to 62 years the legal age of entitlement.

Source: DREES, Document N ° 12 of the COR file of December 2016.

The increase in the contribution period (Touraine version: 1 quarter more every 3 years) is evaluated 10 years after its implementation at 0.14 pt of savings GDP when raising the legal age (version Woerth: 1 more quadrimester a year) 10 years after its implementation causes 0.62 pt of savings GDP. Even considering an acceleration of the implementation of the Touraine system (say 1 quarter every year), the impact would be even lower than the increase in age.

It would be necessary to go beyond this rate, which means to pass the retirement age for a person born in 1964 and having started working at 20 from 62 to 64, and for a person born in 1973 to 63 years to 67 years. A situation that would be even more complicated for people with higher education or with staggered careers who would have to wait even longer to retire.

We can always argue that this is only fair, and although Emmanuel Macron has always rejected the idea of ​​reform to save money but to put in place a fairer and more equitable system, this new orientation will cost more than what JP Delevoye had recommended.

Recall that Emmanuel Macron had justified his choice based on financial perspectives that showed a return in the medium term to the balance of pensions, according to the COR. These long-term prospects have darkened. The outlook of the COR published in June 2019 recalled the reality of the figures: now it will be necessary to wait until 2042 (and no longer 2036, as indicated in 2018) for a return to equilibrium and this, in the most favorable scenario (+ 1 , 8% growth). Conversely, the system would remain permanently in deficit with income from activity growing at a rate of less than 1.5%. They have also darkened in the short term as the report of the Senate of July 2019 recalled: "The financial situation of the Social Security should regrettably deteriorate as of 2019, year which should symbolize the return to the balance of the accounts of the regime general and the FSV because of the lower dynamism of the wage bill ".

If he still does not talk savings, Emmanuel Macron has insisted in Biarritz on his desire that the system is in equilibrium when the switch in 2025. Which means that in return, other measures moderation should be considered. Will it be the value of the liquidation point? Will it be the revaluation of pensions, planned to return to an indexation on wages and not on inflation, a hypothesis that would be pushed back sine die ? Choices will be needed!



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