How the French system works <\/p>\n
The pension system is built on three pillars: the state pension; the mandatory occupational pension, which supplements the state pension; and private pensions. <\/p>\n
Workers born after 1967 will get a state pension at 64 if they have made social security contributions for 43 years. The UK state pension age is 66 and you need 35 years of national insurance contributions to get the full amount.<\/p>\n
As in the UK, social security payments from workers in France fund the pension payments to those in retirement. But what you get out of the state pension differs hugely between the countries. <\/p>\n
In the UK the full new state pension payment \u2014 \u00a3230.25 a week \u2014 is a set amount, regardless of your income during your career. Yesterday it was confirmed that this would increase to \u00a3241.05 from April<\/a> under the triple lock, which guarantees that it goes up each year in line with the highest of average wage growth, inflation or 2.5 per cent.<\/p>\n In France your state pension depends on what you earned; it is calculated by averaging out the 25 highest earning years across your career and giving you 50 per cent of that figure up to a limit of \u20ac23,184 a year or \u20ac1,932 a month \u2014 equivalent to \u00a3419 a week. <\/p>\n French workers can, however, increase this by 1.25 per cent for every quarter they work past 64. So working to 67 could boost their annual retirement pot 15 per cent. Parents also get a pension boost for having or adopting children.<\/p>\n On top of this, French workers pay into a mandatory supplementary pension, which is aimed at ensuring that their pension income is 70 to 80 per cent of their previous work income. This is also based on earnings throughout their career. <\/p>\n This shares some similarities with the workplace scheme in the UK and is managed by two bodies: the Agirc-Arrco and the R\u00e9gime Additionnel de la Fonction Publique, respectively the sole supplementary pension providers in the private and public sectors.<\/p>\n Unlike here, this money is not invested in stocks or bonds to grow. Instead, it pays for the pensions of those who are already retired. Like the state pension, these payments are guaranteed.<\/p>\n This means that top earners get higher pensions. In 2016 some 1.7 per cent of French pensioners were paid more than \u20ac4,500 a month from state and supplementary payouts. <\/p>\n \u201cThis will be far higher today,\u201d said Renaud Foucart, a senior lecturer in economics at Lancaster University.<\/p>\n The French pension problem<\/p>\n While this generous pension system is good for older people, it is bad news for the country\u2019s debt pile. <\/p>\n Because the pension system is based on what is known as solidarit\u00e9 interg\u00e9n\u00e9rationnelle (\u201csolidarity between the generations\u201d), it is dependent on workers\u2019 contributions to fund pensioners\u2019 incomes. The understanding when it was created was that this would continue from generation to generation. <\/p>\n But because of rising life expectancy and a falling birth rate, the French workforce is struggling to cover this, and money is having to come from government coffers.<\/p>\n France\u2019s pension spending accounts for nearly 14 per cent of its GDP, compared with 5 per cent in Britain. France spends more than \u20ac400 billion (\u00a3347 billion) a year on pensions.<\/p>\n
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