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Pension Scheme in France how does it work?
  pension scheme problems cause widespead unrest in France 

An email I received recently read, “The very thought that the French will not get a pension until they are 62 fills me with total horror.”

In the UK the retirement age is currently 65 and looks likely to rise to 66. In France you need to be 60 and if a reform goes through the age will rise to 62 before you can retire and receive your pension.

In France most people do not have voluntary or private pension scheme. In fact when in 1996 a law was passed to encourage a private pension scheme system it was so unpopular that it was quicklly repealed when the next government took over.

Paying into a pension scheme is compulsory in France and contributions paid into the pension scheme are paid out nearly straight away to fund the benefits of those already retired. French people have to save for their retirement through a compulsory industry wide pension scheme.

This is a Pay as you go pension Scheme and it has been adopted in many parts of the world. 

In France the many compulsory pension schemes have gradually consolidated over time so that now most of them are federated to one of two main organisations, called ARRCO and AGIRC who handle the pension funds. The reason these two large groups have developed is that they are seen as being more secure because their members cover a wide inter-generational range of ages.

This is a similar system to the State retirement benefits Pension Scheme in the UK, where contributions are made by people of all ages across the spectrum of those at work. The theory behind this is if things go well, there should be no need to have a funded pool of money.

But if things don’t go to plan, then the pay-as-you-go principle can start to come unstuck and benefits may need adjusting to more affordable levels.

How are the amount of benefits worked out in the French Pension Scheme?

The way benefits are worked out in the French compulsory pension schemes is by an accumulation of ‘pension credits’. These pension credits are converted into a pension at retirement, so the value of the pension credits from time to time is of acute interest to those saving in this way for their retirement incomes.

Before 2003 you had to work for 37.5 years to get enough credits for a French pension. The average pension amounted to 50% of the pensioner's average salary based on the average of their ten highest earning years
(up to a maximum of about £15,000).

In 2003 the law changed and you had to work for 40 years and would receive 50% of the average salary calculated on the 20 highest earning years.

This meant that the average total paid out by the pension credits scheme was reduced.

The banking collapse of 2008 - 2009 and the high unemployment that the knock on effect caused has made the pay as you go pension scheme system hugely unstable and coupled with the increasing life spans of the population there are just not enough funds going into the system which is causing a large deficit.

On the 15th September 2010 The French ruling UMP party passed a controversial reform bill which would raise the minimum pension age from 60 to 62. The huge deficit that the pensions scheme payments have caused after the banking and economic crises has made some reform to the system inevitable.

This is not the way that all of the French see it.

 The leader of the Socialists in the Assembly Jean-Marc Ayrault, said that his party also believed reform was "indispensable"."But unlike you, we do not accept that the weight and the price of the crisis is borne by its victims."

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