The annual report of the Retirement Orientation Council (COR) suggests that the deficit in the pension system may be slightly larger than anticipated in the medium term. The report shows that after generating surpluses in 2021, 2022, and 2023, the pension systems as a whole are expected to fall back into deficit, with a negative balance between expenditures and revenues projected for 2030. This “hole” would represent -0.4% of GDP, compared to -0.2% in previous projections. While these figures reveal a small deterioration, the COR has also changed the presentation of its work and some assumptions for its calculations which provide a slightly different image of the financial outlook for the system.
For the next forty-five years starting from 2024, there is no indication of a return to balance in the pension system according to the new method adopted. This approach has been criticized by some trade unions as it emphasizes a persistent deficit, potentially paving the way for additional efforts to be made by citizens following the 2023 reform that raised the retirement age from 62 to 64. The increased financing requirements for 2030 are attributed to higher expenses that were not taken into account in the previous report, specifically due to higher pension increases in both the private supplementary scheme Agirc-Arrco and the basic retirement system than expected by the COR.
Despite the adjustments made to pension benefits, it is projected that the government will struggle to achieve its objective of bringing the retirement system back into surplus by 2030. The decision to increase the retirement age was made with this goal in mind, but the deficit is anticipated to persist until 2070, where it is projected to reach 0.8% of GDP. The focus is not just on the percentage itself but also on the way it is presented, with the COR now providing projections based on a “reference scenario” for productivity growth, a significant change initiated by the council’s president Gilbert Cette.
The outlook for the pension system remains challenging, with various regimes facing discrepancies in balance and financial sustainability. The projections provided by the COR indicate a need for ongoing monitoring and potential future adjustments. This raises concerns about the long-term viability of the pension system and the ability of the government to address the growing deficit effectively. With the retirement age already increased and additional measures potentially required in the future, the sustainability of the pension system remains a critical issue that policymakers need to address in the coming years.
