According to Nicolas Dufourcq, the debate on pensions is mired in confusion. “We put it in the minds of the French that they had contributed and that, therefore, they were entitled (…), but this is not the beginning” of a pay-as-you-go retirement system, estimated the general director of Bpifrance on the set of BFM Business, this Wednesday, October 15, while the government of Sébastien Lecornu announced the suspension of the very unpopular 2023 reform.
In a pay-as-you-go system, “pensions are an annual public expense, financed by annual rates. It is not because you pay many contributions throughout your life that you will benefit from them, which is not true,” insisted Nicolas Dufourcq, who publishes a new book titled France’s social debt 1974-2024 (Odilia Jacob).
“Pay-as-you-go retirement is nothing like private insurance in which there is an absolutely direct causal relationship between the volume contributed and what is received. The criteria are periodically reviewed and have not stopped changing since the 1970s,” recalled the general director of Bpifrance, who worked in the cabinet of the Minister of Social Affairs in the early 1990s.
Indeed, while private sector employee contribution rates have doubled since 1975, pensions and the relative standard of living of retirees will gradually decline, as BFM Business explains. Thus, while a worker from the generation of 1940 will have contributed on average 18.8% of his gross salary during his career, his retirement pension is equivalent, on average, to 77% of his work income (this is the replacement rate), according to analysis by the Pension Guidance Council.
On the contrary, while a worker from the generation of 1980 will contribute on average 27.9% of their gross salary, their replacement rate will only be 68.9%. This replacement rate will decline even further for subsequent generations. As a result, the relative standard of living of future retirees will gradually decline as they contribute more, in proportion to their income, than their elders.
“Delayed consciousness”
For Nicolas Dufourcq, the current debate on pensions is part of “the very long history of a very late awareness of the aging of the country. France has aged enormously.” The senior official considers it necessary to “depoliticize” this debate, which will mainly focus on a “demographic issue.”
“Let’s congratulate ourselves for having created something crazy, where homeless people and the upper middle class receive the same treatment in hospitals with an out-of-pocket cost of 5%, the lowest in the world, with the most generous pensions in Europe (…). But this system is threatened as soon as the economy does not grow as fast as social spending. Its growth must be stopped,” considers Nicolas Dufourcq.
The French are very pessimistic about the future of their pension system. Almost three quarters of French people (73%) think that retirement system by distribution will no longer exist or “probably” will no longer exist by 2050, according to a Toluna/Harris Interactive survey presented this Wednesday to the High Commissioner for Strategy and Planning. Ten years from now, in 2035, more than seven in ten French people think that this system “will have deteriorated”, according to the survey.
Source: BFM TV
