French face smaller pensions, later retirement: report

[PARIS] France's indebted pension system can only address chronic funding shortfalls if the French accept to work longer and take home smaller pensions, an official report will show on Tuesday.

The report by the Cor consultative body, a copy of which was obtained by Reuters, was the second this week to point to a funding crisis in the system after the Cour des Comptes state audit body raised the alarm on private pensions.

In the short-term, the Cor report found that the pension system's total deficit - a component of France's overall public deficit - would fall from 9.3 billion euros (US$11.6 billion) this year to 8 billion in 2018 as a result of reform measures passed in 2013 to extend the length of time that workers must pay into the fund.

However, even based on optimistic government forecasts of an unemployment rate more than halving to 4.5 per cent between 2030-40, the deficit could only be wiped out by 2030 if further measures are taken, it found.

Notably, it would involve the average retirement rate rising from 61 years now to 64 years by the end of the 2030s, with a 22 per cent drop in the ratio between pensions and work income between 2013 and 2060 - and a 31 per cent drop if more pessimistic macro-economic scenarios are used.

The statutory retirement rate in France is currently 62 years. The Cor report is due to be presented officially on Tuesday.

On Monday, Reuters reported that a report by the Cour des Comptes state audit body to be unveiled Thursday would conclude that the shortfall in the system of private-sector supplementary pension provision risks growing faster than forecast.

That would exacerbate existing pressures in the overall pension system that would in turn undermine efforts by the French government to bring its overall public deficit to within an EU-mandated ceiling of 3 per cent of national output.

REUTERS