France has its own system that goes back to the time of Second world war introduced by the national Resistance Council when the country was reeling from the aftermath of the war. The retirement system in the country is cherished by generations especially because it is seen as hard-earned.
Should 60 be the age of retirement? As an individual who is in their 50s, would you want to retire at 60? I’m asking this question because this is intricately linked to the questions of pensions. Recently, India saw protests by govt employees over bringing back old pension Scheme i.e. OPS.
Earlier, in states like Himachal pradesh and Rajasthan both ruled by Congress, OPS has returned. In Himachal Pradesh in fact that was the turning point for the party. Recently, maharashtra also witnessed protests by employee unions asking the system returns to OPS.
The protest was called off after the assurances from the govt. But do you that India isn’t the only country where Pension has become such a contentious matter. Even France is witnessing strikes and protests on massive scales, sometimes violent, over pension. French president Emmaanual Macron although survived a no-confidence vote, is facing the heat over his pension reforms.
In France, all retirees get a state pension. mandatory payroll taxes are paid by those currently working. These taxes paid by the working population funds the pensions of retirees. Which means the younger generation of those in the workforce bear the cost of assured pension to the older generation. This is also state backed scheme, which means that generations can retire with an assured sum of money. French politicians also laud the system for creating “solidarity between the generations”.
However, there’s a problem.While the life expectancy in the country has increased, so has its aging population. This means more people retiring every year that those entering workforce. If this trend continues the govt believes the current pension system will fall short in the coming decades. According to the administration’s projections, while there were 2.1 workers putting money into the system for every one retiree in 2000, this figure dropped to 1.7 workers per retiree in 2020, and is expected to further slide to 1.2 by 2070.
What does the Pension Reform Plan propose?
The pension reform has always been on the agenda of Emmanual Macron. it was also included in his presidential campaign. As per the pension reform, the french govt plans to gradually raise the age of retirement. Currently, retirement age in France is 62, minimum among all european nations, the reform proposes to take it to 64. In the old system, the workers had to complete 42 years of working to get full pension, now it has been increased to 43. According to the new plan the retirement age will be raised by three months every year till 2030.
There are certain exceptions. Those who started working between the ages of 14 to 19 will be able to seek early retirement, as will public workers engaged in physically or mentally arduous jobs. The government also says it will put in place a ‘seniors’ index’ to check if companies are making progress in hiring and training seniors so that they don’t get left out as the retirement age increases.
The reform will also put an end to a dozen or so “special regimes” with different retirement ages and benefits for different categories of workers including rail workers, electricity and gas workers, and central bank staff. However, the changes will only apply to new workers in these sectors—existing workers will still benefit from the special regimes. But say if you are a mother who has taken significant time off work to raise a child or a person who has taken off work for long study, you will have to complete the set number of 43 years of work to avail pension benefit. which means working till 67 even.
So why is it facing such strong opposition?
As I said the france’s pension system is such where the younger working generation pays for the pension of older generation. Generations of workers have accepted high mandatory taxes to fund the pension system because it creates interdependence and guarantees state-backed pension earnings. The new system means current workers will have to work longer to sustain pensions for the ever increasing aged population. This at a time when Life expectancy has touched 82 as per 2020 World Bank figures.
What fuelled the violent protest was the way the pension reform bill was passed through the french national assembly without a vote. In a last minute announcement, the French president decided to use special provision 49:3 of the Constitution to pass the bill without voting in the National Assembly.
The opposition reacted with strong protest inside the national assembly but also moved two no-confidence motions against Macron. Both motions did not get enough numbers to be passed and thus, macron sailed through the storm. But the protests continue.
there’s one interesting figure as far as India’s NPS is considered. In 2022, government revealed that 83% of NPS subscribers who have reached the age of 60 choose to continue investing beyond maturity. Instead of opting to receive the pension and withdraw part of the NPS corpus, subscribers are extending the accumulation phase well into retirement. The pension vehicle currently allows subscribers to invest up to the age of 75. However, state govt employees say that the pension pay under NPS is meagre and not enough to sustain them.
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