The restoration of the balance of the general pension system has been a major factor of political instability in France for nearly three years. The decision in 2023 to raise the legal retirement age to 64 generated deep discontent that was not without consequences for the outcome of the 2024 European elections. The legislative elections that followed the dissolution decided by the President of the Republic once again reflected this discontent and deprived the country of a majority in the National Assembly. The new government appointed after these elections was then censured by proposing a bill to finance social security which confirmed the postponement to 64 years of age.

The President of the Republic had to appoint a new Prime Minister. The latter, in order to gain time, has entrusted a "conclave" bringing together the social partners with the task of proposing a set of measures allowing the restoration of the accounts and the deadline set for it ends this summer. For the time being, no progress appears and several participants have decided to no longer sit. Each public statement by a politician on this subject provokes controversy, such as the Prime Minister's remarks ruling out a return to a retirement age of 62.

The need to restore the balance of the general scheme and to secure it in the long term is not debatable. The state of France's public finances cannot deteriorate indefinitely, and every cause of the deficit must be remedied. This is particularly true for pensions, which are faced with a structural phenomenon of rising charges due to longer life expectancy and demographics. The age pyramid in France is being reversed with a decrease in the share of the population of working age, and therefore of contribution age, and a continuous increase in the share of the population over 60 years of age.

But this situation should not be the subject of caricatures designed to convince those concerned to accept unpopular measures. A former senior civil servant, J.P. Beaufret published a study aimed at showing that the pension deficit was even greater because it was necessary to add to it the budgetary burden constituted by the payment of civil servants' pensions. The deficit would increase by more than 40 billion euros. But this reasoning has not been validated by the Pensions Guidance Council. 

This institution regularly publishes statistics and forecasts relating to the situation of the general pension scheme. Its conclusions justify taking decisions to correct developments that would worsen the country's public finances at a time when it is essential, on the contrary, to reduce deficits. But successive governments, until now, have focused their reflections and solutions on the setting of the legal retirement age. This is a major mistake for three reasons. 

The first is that this measure is deeply unpopular and has plunged the country into an unprecedented political crisis under the Fifth Republic for the past two years, at a time when the international context would on the contrary require stability and national cohesion. The second reason is that from an economic point of view, this measure is questionable. The structural increase in the deficit of the general scheme is real. It has risen from 1.3 billion in 2023 to 3.9 billion in 2024 and is expected to reach 7.7 billion in 2025 according to Social Security. But the gradual extension of contribution periods will not lead to the expected reductions in deficits. The activity rate of employees over 60 years old is low because companies prefer to let go of them in the event of a workforce reduction. They will have to use their unemployment benefits for longer before receiving their pension. There will therefore be a transfer of charges, but not a reduction. In addition, jobs that will remain in place longer will reduce the supply of labour, to the detriment of the unemployed and young people who are looking for work whilst the unemployment rate remains above 7%.

Thirdly, raising the retirement age is not the only way to reduce deficits. There are three other possible solutions. First, and this is what made it possible to show a temporary surplus in 2022, there is the under-indexation of pensions. It would be just as unpopular if it became systematic. Then there is the increase in contributions from companies and employees. If it is modest and if it is not repetitive, it can help to slow down the increase in the deficit, but it cannot be enough.

The last possibility, which no one is talking about, is to play on the basis of contributions from the general scheme. Up to a certain level, called the ceiling, the proceeds of contributions finance the general scheme. And when salaries are above this ceiling, the proceeds are fed into the supplementary schemes, AGIRC-ARRCO for the private sector and IRCANTEC for contractual employees of the State. We are now in a paradoxical situation, namely that while the general scheme is in deficit, the supplementary schemes are experiencing structural surpluses and accumulating considerable reserves.

AGIRC-ARRCO has 86 billion euros and generated a surplus of 1.6 billion euros in the 2024 financial year, in addition to a financial result of 3 billion. IRCANTEC has reserves of 13 billion and recorded a profit of 1.3 billion in 2023, including 800 million from its financial investments According to the latest COR report, the reserves of all pay-as-you-go schemes had reached 199.2 billion by the end of 2023, to which were added those of the Pension Reserve Fund in the hands of the State to the tune of 21.2 billion. It is as if, by choosing a level of the ceiling for contributions to the general scheme that is too low, one artificially increases one's deficit while filling the coffers of other bodies.

However, this accumulation has no financial justification. In the future, France will create more and more skilled jobs and the increase in wages will automatically benefit the supplementary schemes while not producing any new resources for the general scheme if the ceiling is not raised. Moreover, this situation is not without risks. As reserves are mainly placed on the financial markets, it is to be feared that in the event of a crisis, some of them will disappear.

It is often invoked that these supplementary schemes are managed by the social partners, this constitutes a guarantee and, above all, it offers a good example of collaboration between the trade unions and the employers. This point is indisputable but it is unrelated to the problem posed. By reducing the flow of contributions that artificially swells the reserves of the supplementary schemes, the government, while leaving the social partners to manage the resources collected freely, would save itself from repeated political crises. It could then abandon its measures on the retirement age, the return of which will in any case be insufficient and the economic benefits questionable.   

It is not true to claim that pension plans are in deficit. It is the State, by arbitrarily and paradoxically setting a method of financing that is more favorable to the supplementary schemes, which is mainly responsible for the deficit of the general scheme. Rather than looking for solutions that trigger repeated political crises, it would be better to be aware of this reality and adopt the simple, fair and effective measure that is necessary by raising the ceiling on contributions.