French Pension Reform Advances

by Ulrika Lomas, Tax-News.com, Brussels

26 May 2010

Despite numerous assurances from France’s Employment Minister Eric Woerth that pension reform in France is far from a done deal, early signs indicate that the government may well be further advanced in its thinking than it is prepared to admit, certainly in terms of the legal age of retirement and the contributions period.

Although the government is still – at least officially – in negotiations with its social partners, it has reportedly already settled on several key decisions, including plans to increase the legal age of retirement from 60 to either 62 or 63, and to increase the pension contribution period for those seeking full pension entitlement, from 2011. Under the latest proposals, civil servants may also be affected by the reform, facing a possible rise in the existing rate of their salary contributions.

As previously announced, as regards tax revenue, the government intends to levy a tax on high-income earners, the product of which would at least be equal to costs arising from the highly controversial tax shield or “bouclier fiscal”, estimated at around EUR600m. The government is also reportedly considering other possible means of taxing company revenue.

While Eric Woerth has repeatedly declared that the government has not yet finalized its plans for reform, he has, however, emphasized that individuals in France will be asked to have a longer professional life, in terms of both age and contributions, and has insisted that the measures will be progressive, adding that the outcome of the ongoing negotiations is due to be presented mid-June.

France’s Industry Minister Christian Estrosi also confirmed recently that the government is moving towards an increase in the age of retirement from 60, while also making clear that no firm decision has as yet been made as the talks continue.

Vehemently opposed to the government’s plans for pension reform, unions in France have called for further strikes and protests to take place.

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