In 2023, millions of French citizens took to the streets to protest against proposed pension reforms, specifically the plan to raise the retirement age to 64. This move was perceived as a threat to hard-earned retirement security. France’s welfare state, renowned for its extensive social protections including pensions, is seen by many as a fundamental right essential for maintaining quality of life in retirement.
This blog provides a comprehensive overview of the French pension system, explaining its operation, how pensions are calculated, and the impact of the 2023 reform. We explore various pension schemes, the contribution process, and key factors determining pension amounts, offering a clear guide to navigating the French pension system.
What is the French Pension System?
France’s “protection sociale” is designed to support individuals and families with healthcare, retirement pensions, family benefits, and unemployment support. Funded primarily through social security contributions from both employees and employers, companies are responsible for forwarding these contributions to state administrations.
The French pension system operates on a pay-as-you-go basis. As soon as you start working, both you and your employer are required to contribute to the retirement system. These contributions, known as “Cotisations Vieillesse,” fund the pensions of current retirees. Contributions are calculated at both unlimited rates, which apply to the entire salary, and limited rates, which apply to the portion of the salary up to €3,864 (the “plafond de sécurité sociale” or “PSS”).
- Employer: 2.02% of the entire salary, plus 8.55% for the pss.
- Employee: 0.40% of the entire salary, plus 6.90% for the pss.
For instance, if an employee earns €2,000 gross monthly:
- Employer: Employer pays €40.40 of the entire salary plus €171 (pss).
- Employee: Employee pays €8 of the entire salary, plus €138 (pss).
What is the Retirement Age and How is the French Pension Calculated?
The French pension system has defined legal retirement ages:
- Minimum Legal Age: Gradually increasing to 64 by 2030.
- Maximum Age: Full pension at 67, regardless of contribution.
Your retirement pension is based on three factors:
Insurance Period: The total duration of your professional activity, measured in quarters (3 months).
- Minimum Period for Full Pension: 167 quarters for those born in 1957, and 172 quarters for those born in 1965 and later.
- Early Retirement: Pension reduced on a pro-rata basis and possibly by a “discount” (1.25% per missing quarter up to 20 quarters). For instance, if an employee born after 1965 has worked for 169 quarters instead of 172, they will receive 98.2% of the pension.
Schemes You Have Been Part Of:
- Basic Schemes: Operate on a quarter basis (e.g., Cnav – 50% of the average salary of the best 25 years). For instance, an employee who is under the Cnav scheme and has completed all the required quarters will receive a pension income of 50% of the average of the best 25 years. If the average monthly salary was €3,400, the pension income will be €1,700.
- Complementary Schemes: Operate on points (e.g., Agirc-Arrco – points converted into a pension).
- Number of Points: Salary x Right Rate / Point Purchase Price
- Portion up to €3,864 per month: 6.20%
- Portion between €3,864 and €30,912 per month: 17%
- Point Purchase Price: €19.6321 in 2024
Amount of Earnings During Your Career:
- General Scheme: Based on the average of the best 25 years of income (up to 50% as a pension).
- Public Agents: Calculated on the last six months’ salary (up to 75%).
Individuals may have multiple pensions and contribute to different pension funds over their careers:
- Aligned Schemes: Include SSI, MSA, treated as a unified scheme since 2017 (single application).
- Non-Aligned Schemes: Include public agents, self-employed professionals (separate applications required).
What Did the 2023 Reform Change?
- Retirement Age: Incrementally increasing to 64 years of age by 2030, with a full pension requiring 43 years of contributions by 2027.
- Early Retirement Adjustments:
- Young Workers: Retirement as early as the age of 58 for those starting work before 16 years of age.
- Disabled or Unfit Workers: Retirement at 62 years old with a full pension.
- Handicapped Workers: Retirement at 55 years old under specific conditions.
- Victims of Workplace Accidents: Retire two years earlier under lenient conditions.
- Parental Leave: Now eligible for earning retirement benefits.
The main special pension regimes will be phased out for new hires in certain sectors, who will join the general regime.
Conclusion
The French pension system, rooted in social solidarity and intergenerational support, is evolving to ensure sustainability. The 2023 reform aims to balance the system financially while maintaining fairness for those with long or arduous careers. Understanding these changes is crucial for preparing for retirement and navigating the French pension system confidently.
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