In one field as in the other, it is a reference. A few days after the presentation of the pension reform, the COR (Pension Guidance Council) report published last September was brandished at all costs. Sometimes by the government to demonstrate the need for their project, sometimes by their opponents who reject any measure to postpone the legal age of departure, to 64 or 65 years.
The dialogue of the deaf has been going on for several months now. When Elisabeth Borne affirms that more work will have to be done to save a “structurally deficient” pension system, the unions and the opponents reply that the financial balance of the system is far from being in danger and that the reform is de facto Useless. So who is telling the truth?
Before going into details, let us remember that the COR is an independent service attached to Matignon since its creation in 2000. It is made up of 41 members, including representatives of the social partners, the administration, pension experts or more parliamentarians. Through its annual reports, its main function is to provide short- and long-term projections on the evolution of the pension system according to different scenarios taking into account various indicators (demographics, unemployment, growth, labor productivity per hour).
A real need for financing…
After a deficit of 13,000 million euros in 2020, the pension system has returned to green, this time recording a surplus of 900 million euros in 2021 and even 3,200 million in 2022. A notable improvement mainly due to income growth during the strong post-Covid business recovery.
But this should only be temporary. Depending on the scenario adopted, the system’s deficit would be between 0.5 and 0.8 points of GDP between 2022 and 2032, or around 10,000 million euros per year. Until 2027, this new deterioration is considered “paradoxical” by the COR since it would be the result of saving measures. In this case, the reduction in the payroll of territorial and hospital officials who are listed on the CNRACL.
In the 2028-2032 period, marked, according to the COR, by weak growth and a rise in unemployment (we will return to this), the deterioration of the balance between pension income and expenditure would continue, with a widening of the deficit driven this time by the basic plans of the private sector. In the end, “during the next 25 years, the pension system would be in deficit on average, whatever the agreement and the scenario chosen,” underlines the COR.
The agreements to which the COR refers are two. In the so-called EPR agreement (permanent balance of regimes), it is considered that the State adjusts its spending every year to ensure the balance of the civil service regimes and other special regimes. In the CEE agreement (constant State effort) it is assumed that the State maintains the effort rate in % of GDP that it currently knows, even if the expenses related to civil servants and special regimes decrease.
Like the productivity scenario in particular, the deal chosen can make all the difference. Particularly in the long term, since the COR foresees a deficit until at least 2070 in all scenarios with the EPR convention, except the one based on productivity gains of 1.6% per year (return to equilibrium in the mid-2050s). ). With the EEC agreement, instead, “the pension system would gradually return to equilibrium in all scenarios but in the shortest term (around the mid-2030s in the 1.6% scenario (of earnings from productivity, editor’s note), the 2040s in the 1.3% scenario and the late 2050s in the 1.0% scenario”, write the COR experts.
The defenders of the pension reform will point out, however, that the deficits foreseen by the COR are underestimated because they do not take into account the contribution of the State of the order of 30,000 million euros per year to ensure the balance of certain pension funds. who suffer unfavorable demographic dynamics (state official, local authorities, peasant regime, etc.).
… but “without uncontrolled spending dynamics”
In the absence of a reform, the dynamics of pension spending would remain “contained” throughout the period studied, despite an increasing number of retirees, according to the COR. Between 2021 and 2027, these expenses would even be almost stable, going from 13.8 to 13.9%.
However, this proportion would increase during the period 2028-2032, to 14.7% in the worst case (productivity increase of 0.7%), under the effect of a marked slowdown in growth and a rise in unemployment as explained above. But the forecasts for this period must be interpreted with caution because here it is “an artifact linked to the projection method: nothing allows us to foresee that the economic situation will be especially depressed in the period 2028-2032”, acknowledges the COR itself. .
How to explain this strange prognosis? To understand it better, it should be remembered that the Government is especially optimistic in its stability program with an unemployment rate forecast of 5% in 2027, that is, two points less than the objective adopted by the COR in 2032. Although skeptical, the Pension Guidance Council must carry out its work based on government forecasts for the period 2021-2027. Beyond that, you are no longer required to do so. It is therefore to bring unemployment to its forecast of 7% in 2032 that he imagines a slowdown in economic activity from 2028, with a growth rate of between 0.5 and 1.1% over the next five years. , compared to 1.7% on average between 2022 and 2027. Hence a significant increase in spending and deficits during this “connection period”.
Regarding the period 2032-2070, “the share of pension spending in national wealth would be stable or decreasing” and this despite the gradual aging of the population, judges the COR, which explains this “counterintuitive” result by the fact that that “The unfavorable demographic evolution is offset, on the one hand, by the increase in the retirement age, which would go from 62 to 64 years as a result of the reforms already approved; and, on the other hand, by the lower increase of the standard of living of retirees in relation to assets”. Thus, the share of pension spending in GDP would be between 12.1 and 14.7% in 2070.
“Depending on political preferences, it is perfectly legitimate to argue that these levels are too high or not high enough, and that a reform of the pension system should be implemented or not,” concludes the COR while specifying that “the results of this report does not validate the validity of the discourses that raise the idea of an uncontrolled dynamic of spending on pensions”.
Fall in the relative standard of living of retirees
The element that undoubtedly favors a reform in the short term is the expected drop in the standard of living of retirees compared to the rest of the population if the system were to remain as it is. Because if the average pension were to continue to increase in absolute value due to its indexing to inflation, it would increase less rapidly than average wages.
As a result, the standard of living of retirees compared to that of the entire population would be between 75.5% and 87.2% in 2070, compared to 101.5% in 2019, estimates the COR.
If the authority does not pronounce on the actions to be implemented to correct this effect and reduce the deficits, the government, based on this work, chooses to postpone the legal age of departure. Instead, some unions advocate an increase in dues. To which the executive has always refused, anxious not to increase the cost of labor.
Source: BFM TV
