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Aug 27, 2013

French workers, employers to pay more in pension reform

Would make 43 years of contributions mandatory for all by 2035
By Julien Ponthus
    
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PARIS (Reuters) — A planned French pension reform will increase worker and company contributions in equal proportions from 2014 and gradually lengthen the period for paying in, according to a proposal on Tuesday.

However, the reform will stop short of trimming annual increases that adjust pensions for inflation and avoid some other money-saving measures proposed by a panel of experts earlier this year.

Prime Minister Jean-Marc Ayrault, who agreed to the final proposal in two days of talks with trade unions and employers, said the reform would aim to share out the burden of paying for the increase in life expectancy.

"The reform that I'm proposing aims to fix the accounts in a lasting way while also removing sources of injustice," he said.

The reform will be the most closely watched of Hollande's 15 months in power and risks coming under fire from foreign investors and analysts for not being bold enough to restrain the growth of France's public deficit.

The proposal — to be presented to the cabinet next month and debated in parliament in October — does not touch the legal retirement age of 62, which socialist president Francois Hollande promised to protect after his conservative predecessor Nicolas Sarkozy sparked protests by raising it from 60.

Instead, the reform would very gradually lengthen the pay-in period to make 43 years of contributions mandatory for all by 2035. For now, workers must pay into the system for 41.5 years by 2020 to merit a full pension.

The proposal would raise pension contributions by 0.15 per cent in 2014 and then by a further 0.05 per cent in 2015, 2016 and 2017 to help fill a hole in the pension pot set to reach 20 billion euros ($27 billion) in 2020.

The government, under fire from the business sector over high labour costs, aims to soothe the pain for companies by passing a parallel measure to lower the social charges that employers pay on salaries.

The reform proposal will move the month for adjusting pensions for inflation from April to October, saving some 600 million euros per year.

Well-off pensioners with three or more children would be taxed on a 10 per cent bonus they receive on their pensions.

    
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