French pensioners are making more than the average wage. The Organisation for Economic Co-operation and Development puts France as the only developed country where average incomes for the over-65s are higher than for working-age citizens.
The average income for over-65s in France is about 1 per cent higher than it is for workers, after taking into account taxes and other social contributions, according to analysis by the Financial Times of figures from the OECD group of advanced economies and the Luxembourg Income Study, a not-for-profit group.
The state pension can pay as much as €23,184 (£20,135) a year in France, while in the UK the full new state pension pays £11,973 a year, going up 4.7 per cent to £12,535 next year, in line with average wage growth.
The average income for someone aged over 65 in the UK is 20 per cent lower than the average for working-age adults, according to the Financial Times.
Comfortable retirements for French citizens, largely funded by the generous state pension, are contributing to the nation’s €3.4 trillion of debt and growing economic crisis. The debt pile is so bad, at 113.9 per cent of GDP, that the finance minister Eric Lombard warned last month that the country could need its first bailout by the International Monetary Fund. UK debt by contrast is £2.8 trillion — 95.9 per cent of GDP, according to the government-funded Office for Budget Responsibility.
An attempt by the former prime minister François Bayrou to put forward measures to shrink the French debt, including reducing pension payments, contributed to his being ousted in a no-confidence vote on September 8, just nine months into the role.
• The exact year that the triple lock will bankrupt the state pension
How the French system works
The pension system is built on three pillars: the state pension; the mandatory occupational pension, which supplements the state pension; and private pensions.
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.
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.
In the UK the full new state pension payment — £230.25 a week — is a set amount, regardless of your income during your career. Yesterday it was confirmed that this would increase to £241.05 from April 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.
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 €23,184 a year or €1,932 a month — equivalent to £419 a week.
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.
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.
This shares some similarities with the workplace scheme in the UK and is managed by two bodies: the Agirc-Arrco and the Régime Additionnel de la Fonction Publique, respectively the sole supplementary pension providers in the private and public sectors.
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.
This means that top earners get higher pensions. In 2016 some 1.7 per cent of French pensioners were paid more than €4,500 a month from state and supplementary payouts.
“This will be far higher today,” said Renaud Foucart, a senior lecturer in economics at Lancaster University.
The French pension problem
While this generous pension system is good for older people, it is bad news for the country’s debt pile.
Because the pension system is based on what is known as solidarité intergénérationnelle (“solidarity between the generations”), it is dependent on workers’ contributions to fund pensioners’ incomes. The understanding when it was created was that this would continue from generation to generation.
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.
France’s pension spending accounts for nearly 14 per cent of its GDP, compared with 5 per cent in Britain. France spends more than €400 billion (£347 billion) a year on pensions.
• The endless cost of the public sector pension ‘Ponzi scheme’
Attempts at reform have been met with resistance from voters and politicians. President Emmanuel Macron made sweeping pension reforms in 2023, including raising the retirement age from 62 to 64 for those retiring from 2031. This led to widespread protests, including a national strike involving nearly 1.3 million people.
It came four years after previous Macron reforms, to reduce the 42 different pension schemes into one state-managed scheme, provoked similar protests and were abandoned.
Bayrou was ousted this month after he put forward a budget aimed at tackling the state’s crippling debt by freezing welfare and payments, as part of a plan to save €44 billion (£38.3 billion).
Why is reform so hard?
The state pension is regarded as sacred by the French public, akin to how the UK feels about the NHS.
“If you look at people demonstrating in the street, you have a lot of young people demonstrating over what they see as the French dream, the fact that there is this cast-iron guarantee that they will get this income,” Foucart said.
But the reality is that these generations won’t get the same pension income as their parents, because demographics make it ever harder for workers to pay for an ageing population.
A protest against pension reform in 2023
GETTY
Pascal Serrand, a partner at the financial consultancy firm RSM France, suggested that the French pension system would have to become a more hybrid model, giving a larger role to private pensions through tax incentives.
• We can not afford generous pension rises as a matter of routine
“The pay-as-you-go system managed by the state will be very difficult to sustain due to the persistent demographic imbalance,” Serrand said.
“Successive governments have tried to introduce various measures to increase employees’ share of retirement funding via third-pillar, privately funded pensions, while reducing the relative share of the state pension. But this is politically very difficult because it touches on the fundamental values of solidarity, a sensitive issue for the French.”
Any shift to a model in which French workers invest for themselves could generate significant costs for the government. François Valentin, a French political analyst who worked for the political risk consultancy Eurasia Group, said: “A transition would be difficult because you’d be asking those paying pensions now to also pay into a future pensions model.”