The French Old Age Security System in 2020

By Linxin He, Max Planck Institute for Social Law and Social Policy

In France, the first compulsory pension system for industrial and agricultural workers was created only in 1910. Before this legislation, the French pension system consisted mainly of private pension funds established by employers in sectors where the risk of professional hazards was particularly high (for example in the mining sector). This heritage has largely shaped the contemporary French pension system, which is above all characterised by a large heterogeneity of pension schemes based on the type of professions. Although there have been multiple reform initiatives in the past, the existence of numerous special pension schemes still remains a remarkable feature of today’s system (not to mention the public sector which has had its own pension system since a law of 1853). Despite ongoing reform intentions,¹ the current French old age pension system is still fragmented, yet quite generous. ‘Standard protection’ is based on mandatory insurance in profession-specific public pension schemes, also referred to as basic schemes (régimes de base) and (with only few exceptions) supplementary occupational pension schemes managed by social partners (régimes complémentaires). The state also encourages subscription to voluntary occupational and private pension schemes through tax reliefs to ‘top up’ public and occupational pension benefits acquired through mandatory insurance. A ‘minimum’ level of protection is guaranteed by a regulated minimum pension as part of the basic public pension schemes. For elderly persons who do not qualify for a public minimum pension and whose financial means fall below the subsistence level, the state itself provides a minimum income benefit through social assistant measures.

Standard Protection

The main basic public pension scheme is the general scheme for employees in industry and commerce (Régime général des salariés). It was created in 1945 after the Second World War and functions on a pay-as-you-go (PAYG) basis. Insurance in this scheme is mandatory for all employees working under a labour contract (contrat de travail) for an employer, particular groups of persons who have been assimilated by law and are treated as employees (such as home workers, managers, sales representatives), and the self-employed (with the exception of liberal professionals). Under specific conditions, persons not subject to mandatory insurance can join the general scheme voluntarily. Next to the general scheme, there are other basic pension schemes for specific occupational groups: the farmers’ old age pension scheme (Mutualité sociale agricole, MSA) for self-employed farmers and their family members, the old age pension scheme for the liberal professions (Assurance vieillesse des professions libérales) and other schemes for specific occupations, such as schemes for railway workers (especially the SNCF company), artists (French Comedy, Opera of Paris, etc.), employees of the Bank of France, lawyers.

Further, mandatory insurance in supplementary occupational pension schemes provides a supplementary level of protection. The largest scheme is the supplementary scheme for private sector employees  (AGIRC-ARRCO)² which initially was divided into the scheme for executives (AGIRC, created in 1947) and the scheme for all private sector employees (ARRCO, created in 1961) until its unification in 2019. This scheme functions on a PAYG basis and includes most insured persons of the basic public general scheme for employees in industry and commerce. Other special supplementary schemes exist, such as the complementary pension scheme for public employees on labour contracts (Institution de retraite complémentaire des agents non titulaires de l'État et des collectivités publiques, IRCANTEC), the supplementary pension scheme for the liberal professions (Régime complémentaire des professions libérales), the supplementary pension scheme for self-employed farmers (Retraite complémentaire obligatoire pour les exploitants agricoles, RCO), the supplementary pension scheme for self-employed persons (Régime complémentaire des indépendants, RCI) and other supplementary schemes for particular professions. 

For some occupations, standard protection is provided by a single basic public scheme. These schemes are also referred to as complete schemes (régimes intégrés). They are often PAYG-financed, mostly out of the state budget, and often fall within the category of special schemes (régimes spéciaux) due to their historical roots. Prominent examples are the old age pension scheme for civil and military servants (Retraite des fonctionnaires de l’État), the old age pension scheme for local civil servants (Retraite des fonctionnaires territoriaux et hospitaliers) and the special pension scheme for employees in industrial establishments controlled by the state (Retraite des ouvriers des établissements industriels de l'État, FSPOEIE). Despite constant initiatives to reduce differences in social protection between civil servants and private sector employees (cf. the pension age), the pension schemes for civil servants still remains more generous. Moreover, civil servants at state and local level benefit from the fully funded mandatory insurance provided by the additional scheme for civil servants (Régime additionnel de la function publique, RAFP). This scheme lies at the frontier of standard protection and can equally be analysed as a topping-up measure for civil servants. 

Top-Ups

The French system allows different possibilities to top up pension benefits by means of private saving plans. A law in 1994 (so-called ‘loi Madelin’) has recognised the legal status of these so-called institutions of supplementary pension (institutions de retraite supplémentaire). Tax reliefs are provided by law in order to encourage employers and employees to subscribe to a private savings account. Different saving possibilities have been envisaged by law, such as the collective occupational pension plan to be set up by an enterprise (Plan d'épargne pour la retraite collectif, PERCO) and the individual pension plan (Plan d'épargne retraite populaire, PERP), which were closed for new entrants starting from 1 October 2020. Law N°2019-486 (la loi ‘PACTE’) has simplified these private saving plans and new regulations have entered into force, creating three types of private pension products: individual pension plans (Plans d’épargne retraite individuels, PER individuels), collective occupational pension plans (Plans d’épargne retraite d’entreprise collectifs, PERECO) with the option of opting out and mandatory collective pension plans (Plans d’épargne retraite obligatoires, PERO) in which participation is mandatory for the employee.

Minimum

A minimum level of protection is guaranteed by a contributory minimum pension (minimum contributif) as part of most public pension schemes for elderly persons who fulfil all contributory requirements for a full-rate pension. A minimum income benefit for elderly persons with insufficient financial means who do not qualify for the contributory minimum pension benefit of the basic public scheme is guaranteed through social assistance measures. The rules of these measures were simplified in 2004. A minimum benefit is now provided by the solidarity allowance in old age (Allocation de solidarité aux personnes âgées, ASPA). This social assistance benefit is also commonly referred to as ‘minimum vieillesse’ (minimum income benefit in old age) and is entirely financed by the public budget. It is means-tested, based on the personal income or the family income according to the situation of the household like other social assistance measures and is available for people who are at least 65 years old. 

¹ French President Emmanuel Macron promised, at the beginning of his term, a pension reform which would create a general pension system, and the reform process in effect started in 2019. The unexpected coronavirus pandemic has interrupted the legislative procedure.

² General Association of Retirement Institutions for Executives (AGIRC), Association for Employees' Supplementary Pension Schemes (ARRCO).