Wave of protests: What is France's pension reform about?


In France, demonstrations against the pension reform passed last week are escalating. The French pension system is quite generous in an international comparison. A look at Europe.

Violent riots broke out in France at the weekend during protests against the pension reform

President Emmanuel Macron wants to raise the retirement age in France from 62 to 64. In many countries, not least in Germany, people shake their heads at this. Because the number 67 has stuck in these heads, because retirement in Germany will increase to this age from 2024.

“It is always difficult to compare pension systems because they are all very complex and very different. But this comparison is wrong,” says Ulrich Becker from the Max Planck Institute for Social Law and Social Policy, which works with the “Pension Maps”. Pension systems around the world graphically processed and thus made their peculiarities visible. 

The opposition in parliament joins the protest against the pension reform

What is being raised and so strikingly struck in France is the earliest possible point in time at which workers can retire without having to accept pension deductions. Provided you have worked for 41.5 years, in future that should be 43 years.

In Germany this is currently possible at the age of 63, in future at 65 years – but only after 45 years of contributions. In France, too, a pension without deductions regardless of the length of employment is only available from the age of 67 – this is to remain the case with the reform.

French pensioners at an advantage

In fact, French pensioners have been doing quite well so far in an international comparison – not only with Germany. At least if you measure this using the following three criteria: the amount of the pension, the age at which you start and the length of time you receive the pension, i.e. the life expectancy at the beginning of the pension.

How well it is possible to maintain the standard of living in retirement depends on how high the pension is compared to regular earnings. The so-called net pension replacement rate is the percentage that remains of the net income that one has received on average throughout one’s working life.

In France, that was a whopping 74 in 2020, 4 percent. That would mean: Anyone who received an average monthly transfer of 2,500 euros from their employer would receive a pension of around 1,860 euros.

This puts France 14 percentage points above the OECD average in terms of the net pension replacement rate. In Germany, pensioners are left with just 52.9 percent of their lifelong net salary. 

Those who study work less 

In fact, the rate in France could fall for many people in the future. The reason: together with the minimum age, the number of years of employment from which one receives a full pension should also be increased. 

This could affect low earners in particular, since they usually start working earlier. On the other hand, if you only start paying pension contributions at the age of 25 because you have studied, you are already 67 after 42 years of work and will receive your full pension.

To compensate, the pension reform provides for an increase in the minimum pension to about 1200 euros for single people. It is currently EUR 961.08, which puts it in the middle of the pack when compared to the average income of the population in an OECD comparison. By the way: Germany is one of the few countries without a minimum pension. 

In fact, in many countries, people accept pension deductions in order to give up their jobs earlier. In France, men retire on average at 60.4 and women at 60.9. This means that French people retire almost 3.5 years earlier than their respective OECD peer groups and French women 1.5 years earlier.

At the same time, life expectancy in France is particularly high. Only in Luxembourg (24 years) men are allowed to enjoy their retirement a little longer on average than in France (23.5 years). Only Greeks (28.4) and Spaniards (27.7 years) have it better than the French (27.1 years). 

Long life, long retirement?

These are the reasons for the pension reform in France. “France must face the question of how to adapt its pension system to demographic change,” explains social law expert Ulrich Becker.

It is a problem for pension funds that people are getting older because the pension has to be paid out over a longer period of time, although no more has been paid in. In addition, birth rates are falling and therefore fewer and fewer workers have to pay the contributions for more and more pensioners. 

Therefore, no pension system in the OECD can get by with the contributions of the insured alone. In France, public pension subsidies – as a percentage of gross domestic product – are among the highest in the OECD, only in Italy are they higher. That was what Macron's head of government, Elisabet Borne, was aiming for when she declared: “With the project, we are presenting a guarantee that the pension funds will be financially balanced by 2030.”

“Abolish privileges”

“One The obvious and widely discussed remedy is to raise the retirement age,” explains Becker. “It's helping people pay longer and get shorter benefits. It's an attempt to straighten out the contribution-benefit ratio.”

A number of OECD countries have already done just that, and many are already planning further increases : In the Netherlands, Denmark, Estonia and Italy, the retirement age will rise to 69 or more in the next few years.

And in France? “It is lost sight of the fact that the reforms are also intended to abolish privileges for certain groups,” says pension expert Becker. “The reason for this is obvious, that the defense of social rights is considered more important than their intergenerational equitable distribution.”