Current and future pensioners face a stark question. Are the starting level and purchasing power of pensions going to keep falling both for existing pensioners and those who are paying-in now to acquire future pension rights? Because pensions are an issue that ultimately affects us all, from OAPs to newborns.
The solidarity-based, pay-as-you-go systems introduced in France after World War Two face a daunting challenge. Since the 1993 Balladur reform, worsened by the 2003 Fillon Act for the civil service, then the 2007 occupational schemes reform presided over by Fillon again, this time as Prime Minister, pensions and the rights that future pensioners are buying have continued to shrink away. What happened, and what has it led to?
WHAT CHANGED IN 1993. Before the 1993 reform, the pensions paid by the national old-age insurance fund (Cnav) to private sector pensioners were calculated on the basis that anyone with 150 quarters of paid-in contributions received a basic pension equal to 50% of their monthly average earnings during the 10 best years of their career. Thereafter, the average rise in pensions was linked to the average rise in private sector earnings, so that pensioners also enjoyed the benefits of economic growth.
The 1993 reform introduced three big changes, the aggregate effect of which was to reduce on all points the amount of the pensions paid to current and future pensioners. Within ten years, we had gone from a 150 quarters contribution record to 160 quarters, increased at the rate of one quarter a year. An employee born in 1933 was able to retire on a pension at 60 years of age with a complete Cnav pension calculated over his ten best years’ average earnings if he had paid in for 150 quarters. An employee born in 1943 had to have a full 160 quarters’ contribution record to retire on a full pension in 2003 calculated over the 20 best years’ average earnings. The result is lower pensions for any employee who had neither 160 quarters’ contributions nor 20 contribution years as good as the 10 best. Anyone born in 1948 retiring in 2008 will also have to have 160 quarters to get a full pension calculated over their 25 best years’ average earnings.
MILLIONS OF PENSIONERS PENALIZED. These tighter conditions for entitlement to a full pension has been the main cause of the decline in private sector employees’ pension purchasing power in the past fifteen years. In 2003, public sector workers also felt the chill of the 160-quarter requirement, which was extended to occupational scheme pensioners in 2007. The move will also result in smaller pensions for all men and women who cannot show a full contribution record of 160 quarters.
The 1993 Balladur reform was also responsible for creating the pensions link to consumer prices measured by the INSEE [1] index which did not include tobacco; this curbed pension increases. The CGT calculates that pensioners lost 20% of their purchasing power compared to the employed labour force over fifteen years. The same applies to supplementary pension schemes, as the pensions provided by Agirc [2] dropped by 25% in 10 years, while those paid out by Arrco [3] lost 20%. During all this time, no extra effort was called for from employers in terms of contributions, while labour productivity, new wealth creation, business profits and the pay-packets of bosses who were able to treat themselves to “top-hat pension schemes” kept on rising.
Contrary to what the Fillon government claims, the pension reforms of 1993, 2003 and 2007 were not so much designed to “save” our intergenerational, solidarity-based pay-as-you-go system as to cut the pensions paid out to today’s and tomorrow’s pensioners. The architects of these reforms, and the MPs who voted them through, chose not to increase employers’ contributions in an ever-wealthier country. Instead, they chose to limit the number of full careers by tightening up the qualifying conditions for a full retirement pension. They refused to allow pensioners to benefit from growth by index-linking pensions to rising prices as minimized by INSEE. Even this feeble link to the official index is not being honoured in 2007-2008, as is shown by the 1.8% increase in pensions in 2007, when inflation stands at 2.6%, and the derisory 1.1% increase at the start of this year while prices are expected to rise by more than 3% in 2008.
There is therefore an urgent need to act to ensure that trade union proposals to make pensions secure are taken into account. Starting with those put forward for CGT by Jean-Christophe Le Duigou in Vie Nouvelle.
Gérard Le Puill
UCR-CGT’s “Vie Nouvelle” magazine, No. 145 - June/July 2008
RSS 2.0