By: HUB’s EB Global Benefits Team
France will raise its statutory minimum retirement eligibility age to 64
France’s controversial pension reforms were signed into law by President Emmanuel Macron in April 2023 and are scheduled to come into effect on September 1, 2023.
The main provisions of the law include an increase in the statutory minimum retirement age, and the minimum number of years contributing to the system to be eligible for a full pension.
The minimum retirement age (62) will gradually increase by three months every year starting on September 1 until it reaches age 64 in 2030. The age of automatic entitlement to a full pension remains at 67.
Meanwhile, the minimum number of years of pension contributions required to earn a full pension will also increase in three month increments each year from the current 42 years to 43 years in 2027. This is an acceleration of a prior reform bill reaching the target 8 years earlier.
Pension Reform Laws Come Into Effect September 1, 2023
The law has also prescribed a modest increase in the value of the minimum retirement pension that is now fixed at €1,200 per month.
The pension reform has been met with widespread protests and the government required a special ordinance to pass it through parliament.
With these reforms the government aims to improve the sustainability of the French pension system as its population ages. It also seeks to address its growing deficit, which is projected to reach €17.2 billion by 2025.
According to OECD data, France has one of the lowest statutory retirement ages in the EU, coupled with the highest expenditure on its pension system as a percent of GDP.
Other measures to boost the employment of older workers are included in the law. One of those is the harmonization of tax treatment of contractual termination indemnities between those before and after initial eligibility for a statutory pension. Those prior to retirement eligibility will be subject to an employer contribution of 30% of the indemnity from September 1 onwards.
The Constitutional Council rejected some aspects of the law at the last minute, such as the obligation for companies to publish statistics on older workers or the introduction of a special employment contract with exemption on social charges for those over age 60. Nevertheless, the government has vowed to press on with measures to bring France’s employment rate of older workers up to the EU average.
How this impacts you
- The law will cause mainly non - managerial or non-professional employees to retire later as these generally started working earlier.
- Employers will no longer have the ability to “pre-retire” an employee before eligibility for a retirement pension on a more tax favorable basis for the company.
- Older workers on payroll will lead to an increase in the cost of benefits such as life, disability and medical insurance due to the higher risk and utilization related to these employees.
Next steps
- Review workforce policies and practices related to the older workforce to avoid discrimination, promote productivity and transmission of knowledge, and work - life management.
- Evaluate the potential impact of the maintenance of older workers on future payroll and benefit costs.
- Review short-term retirement planning opportunities prior to the September 1 effective date, for example with regards to contractual termination indemnities.
- Discuss impact of the law on own workforce with union and employee representatives.
If you have any questions, please contact your HUB Advisor. View more updates in our Global Benefits Directory.