How pensions will change in the new system of pension points ? Here are the two tracks preferred by the high commissioner to the reform.

On July 22, 1993 was enacted in the pension reforms the most important of the last decades, the “Balladur”. If this act has not mobilized at the time, she has significantly affected in the long term, the levels of pensions in the private sector.

This is since the reform, in particular, that the pensions of the private, are calculated on the best 10 years of the career, but on the 25. But it is also since 1993 that it is written in the law that pensions are uprated each year in line with inflation rather than wage developments.

This measure has helped, over the years, to strongly limit the revaluations of the pension, the price generally increases less rapidly than wages. Where repeated requests from the unions to abandon this method of indexing.

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The next pension reform will she be given the opportunity to respond favourably to this request ? The topic was on the menu of discussions with the social partners, at the end of February. The idea of a revaluation is adjusted to 100% on the evolution of wages seems to be ruled out by the high commissioner to the reform Jean-Paul Delevoye. To limit the cost of the measure, it would be necessary to pay pensions much lower than today at the beginning of retirement. Two options are on the table.

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Index pensions on inflation, like today…

First track : maintain the current mechanism, indexed to inflation. This system easily understandable warrants to you, the pensioner with the preservation of its purchasing power each year.

This choice has two drawbacks. On the one hand, the pensioners would not benefit from the growth, the term risk is that their level of life picks up compared to that of the assets. On the other, indexing to inflation is a source of financial uncertainty for the system.

When the economy is in good shape, the improvements are limited, a good news for the coffers. Conversely, in the case of very low growth, it is necessary to provide retirees with an appreciation at least equal to inflation. At least in theory, because in recent years, 2019 included, pensions have been repeatedly either frozen, or under-indexed on the decision of the various governments.

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The indexation of pensions on inflation is in part responsible for the hyper-susceptibility to the growth of accounts in the system. This dependence is a major concern of predictability : we can not say today if, in 25 years, the system will be in balance or in deficit of 20 billion euros… it All depends on the assumption of growth restraint.

… Or on the income assets ?

An alternative seems to be preferred by the artisans of the reform : to base the revaluation on annual income changes of assets, but by applying a subtraction – this applies to employees, self-employed persons and civil servants, it would therefore income rather than wages. For example, with a formula of indexing “the evolution of income at least 1.3 point”, and the adjustment would be 1.7% if revenue growth on a year of 3% (3% minus 1.3 percentage points).

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Would, of course, to determine the precise level of this reduction and to fix, or not, of the minimum levels of revaluation. To protect pensioners in bad years (if the growth is lower than inflation), could for example be decided that the application of the formula may in no case lead to a revaluation of less than inflation, or “inflation minus X”. In any case, it seems politically necessary to secure the reform that pensions cannot fall.

difficult trade-offs

The adjustment formula must be established once and for all or be able to change periodically ? If it can vary, who must decide whether and to what extent ? The concerns relating to the development of pensions weigh heavily on the overall confidence of citizens in the current system. How to make sure that the drivers for the new device does not “play” with the formula ?

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Explosive politically, these issues are very complex : they cannot be treated in isolation, since it is necessary to ensure the financial equilibrium of the scheme. The mode of indexation of pension chosen, will depend on the effect, in part, the level of the liquidation. If they climb more quickly in the course of the retreat, they will necessarily be lower at the time it submits its rights.

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would you Prefer to touch in the beginning of the pension a higher pension, but which will be subsequently less well upgraded, or perceive the source of a pension low but that number is expected to grow more quickly ?The response of each will be different depending on whether he anticipates a retirement long or short.

Another question, the improvement of the rights-long career.

How the values in the point of retirement will evolve-t-they over the years ? His value of “service” (how I get board with a point), but also its value to “purchase” (how contributions are used to obtain a point) ? The subject is technical, but also critical for future retirees.

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Answers a priori in June, the date on which the high commissioner still plans, for the moment, to unveil his plans for the future pension system universal.