Workers in France should pay into pensions for longer: Panel

Recommends increasing contribution period for full pension from 41.5 years to 44 years
By Ingrid Melander
|hrreporter.com|Last Updated: 06/14/2013

PARIS (Reuters) — The French should pay contributions for longer to get a full pension and well-off pensioners should get fewer tax rebates, according to a much-awaited advisory report to President Francois Hollande's government.

The study — which the government has said is of consultative value — proposes only a fractional increase in employers contributions after the European Commission and IMF both recommended that employers should not see their costs rise.

The objective of the reform is to balance the loss-making French pension system by 2020. Past governments have sought to overhaul France's generous but costly system of old-age provision but have run up against fierce street protests.

The government has said it will study proposals from the report but is not bound by them for its planned revamp of the pension system later this year.

"The committee considers that increasing the duration of contribution is the most relevant way of adapting the pension system... to longer life expectancy," the report said.

The panel recommends increasing the contributions period needed for a full pension from 41.5 years now to up to 44 years.

It recommends no increase for now in the statutory retirement age, which was raised to 62 from 60 in 2010, but says this is something that should also be looked into in the medium to long term.

It suggest increasing pension contributions by 0.1 percentage points per year between 2014 and 2017, and to share that equally between employers and employees.

France has tried for more than 20 years to reform its loss-making pension system but successive governments have only pushed through minor reforms in the face of staunch opposition.

Some of the toughest strikes and protests France has ever known were triggered by pension reforms, with the country paralysed for weeks in 1995 when the then conservative Prime Minister Alain Juppe tried to push through reforms.

More than one in seven French say a reform is necessary but 80 per cent consider the upcoming reform, with a draft law expected in the second half of the year, will not guarantee the sustainability of the pension system. Two-thirds do not trust Hollande to handle it well, a Tilder-LCI-Le Figaro poll showed.

The last reform, which was undertaken by Hollande's predecessor Nicolas Sarkozy in 2010 and raised the retirement age from 60 to 62, caused hundreds of thousands of people to take to the streets in French cities and a blockade of oil refineries.

Hollande brought it back down to 60 for those who have started working early.

In a sign of how sensitive pension reforms are in France, the Socialist president angrily told the European Commission it could not "dictate" French policy after the EU executive urged it last month to take measures to reform its pension system by the end of 2013 and warned against increasing employers' social contributions.

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