The French Social Security System – Retirement
In France, the basic pension is topped up by compulsory supplementary pensions, which, like the basic pension, are financed on a pay-as-you go basis. For private-sector employees, the compulsory supplementary schemes are ARRCO, covering all categories of employees and AGIRC, covering only managerial and executive staff.
A – Basic Scheme
Basic pensions under the general scheme are awarded by:
- The (regional) retirement and occupational health funds (caisses d'assurance retraite et de santé au travail/ CARSAT),
- the Île-de-France national old-age insurance fund (caisse nationale d'assurance vieillesse d'Île-de-France) for the Paris region,
- the general social security funds (caisses générales de sécurité sociale/ CGSS) for the overseas Departments,
- the CSS in Mayotte.
The 2010 pension reform Act raises the legal minimum retirement age for persons born after 1st July 1951, which rises to 62 years for people born in 1955 onward. Under the 2012 Social Security Financing Act, this rise is brought forward. At the same time, the age of automatic entitlement to a full pension (legal minimum retirement age + 5 years) rises to 67 for persons born after 1st January 1955.
Persons with many years of service, who have a disability or who have worked under arduous conditions can claim their pension before reaching the legal minimum retirement age.
1 - Qualifying conditions
The legal minimum retirement age is 62 for persons born after 1st January 1955 and 60 for persons born before 1st July 1951, increasing by 4 months each year for persons born between 1st July 1951 and 31 December 1951, and 5 months each year for subsequent cohorts.
Workers are not required to claim their pension as soon as they reach statutory retirement age. Those who continue to work after the legal minimum retirement age and who have paid contributions for longer than the qualifying period for a full pension (this depending on the year of birth), can obtain an increase of their pension.
a) Calculation of the pension
The amount of the pension depends on three factors:
- Basic salary or Average Annual Earnings (SAM): average annual earnings are the adjusted earnings on which contributions have been paid. Since 1st January 2008, the SAM has been calculated on the basis of the 25 best-earning years for all individuals born after 1947.
- Payment rate: the maximum rate of 50% is reduced by a percentage determined by the difference between the number of quarters credited and the number of quarters required to receive the maximum rate, with consideration for individual's age and total period of insurance. The most advantageous calculation for the individual is used. The minimum rate is 37.5% for individuals born in or after 1953.
- The total period of insurance, including periods credited as periods of insurance, is used to determine the payment rate of pensions paid between the legal minimum retirement age and the age of automatic entitlement to a full pension (between 62 and 67 for persons born after 1st January 1955). The 50% full rate is payable to individuals having a total insurance period of 160 to 172 quarters (depending on year of birth), aged over 67 (for persons born after 1955) or belonging to specific categories (persons incapable of work, former veterans or prisoners of war and female workers who have raised at least three children).
The total period of insurance, which is used to determine the rate at which the pension will be paid, includes both periods of contributions paid to the various basic schemes (see Article L. 351-1 of the Social Security Code) and periods treated as such, i.e. periods of cessation of work in the case of sickness, maternity, disability, industrial injury, military service, unemployment, etc.
Period of Employment Abroad
Periods of work abroad in a state with which France has a social security agreement may in certain conditions be taken into account for the purpose of determining the pension payment rate.
Under French legislation, the periods of work abroad completed prior to 1st April 1983 for which buyback contributions can or could have been made, are counted as credited periods of insurance when determining the pension payment rate once the person concerned has reached the legal minimum retirement age (Article R. 351-4 of the French Social Security Code).
The total insurance period is the effective period of insurance (contribution periods and periods treated as such) under the insurance scheme. With the different reforms, the period of insurance required for a full-rate pension has increased progressively
- 150 quarters for persons born in or before 1943,
- 160 quarters for persons born in 1948.
- For the cohorts born in subsequent years, the reference insurance period increases by one quarter per year, going up to 165 for those born in 1953 and 1954, and 166 for those born between 1955 and 1957. The required length of insurance then increases by one quarter for each 3-year period, going up to 172 quarters for those born in or after 1973.
Thus, for an individual born in 1952, the pension calculation formula will be as follows:
basic salary X rate X total insurance period under the general scheme / 164 (quarters).
Early retirement pension
Under certain circumstances, it is possible to retire early without a reduction in pension rate:
- Retirement from arduous work: workers can retire up to two years before the statutory retirement age (or at age 60 rather than 62). Indeed, 8 quarters of insurance can be credited to an insured who has acquired points for exposure to one or more industrial risk factors over a given period. The arduous work account is open from 1st January 2015 for workers exposed to certain factors, and new factors have been taken into account as from July 2016. For more information on the arduous work account: www.preventionpenibilite.fr.
- People with many years of service may retire at age 60 or before if they can demonstrate a minimum length of insurance and contributions and began working at a very young age. The required minimum length of insurance varies depending on birth year, age at retirement, and age at which the retiree began working.
- People with a disability may retire between ages 55 and 59 provided that they have a permanent disability percentage of at least 50% or have official disabled-worker status before December 31, 2015. They must also have, a certain length of insurance (including a minimum duration of employment-related contributions) during the period in which they were disabled. The required minimum length of insurance varies depending on birth year and expected age at retirement.
People who wish to draw their pension but do not have the qualifying period of insurance for a full pension will receive their pension at a reduced rate. The percentage reduction is determined by the number of missing quarters and the generation to which the insured belongs: 1.625% for persons born in 1950, 1.5% for persons born in 1951, 1.375% for those born in 1952 and 1.25% for those born from 1953 (i.e. a decrease of 0.625 for each missing quarter). The pension will continue to be paid at the reduced rate from then on.
Increased pension rate
Individuals with the requisite period of insurance for a full pension, and who continue working after the legal minimum retirement age (between 60 and 62 depending on the year of birth), qualify for a pension increase. This provision is applicable as of 1st January 2004, with different rates depending on the period during which the contributions were paid. For quarters completed after 1st January 2009, the rate of increase is 1.25% for each additional quarter.
b) Increases in length of insurance
For women, a maximum of 8 additional quarters of entitlement is awarded for each child (4 for maternity or adoption and 4 for raising the child). For children born after January 1st, 2010, these additional quarters for child-rearing can be awarded to either parent (at their discretion) in recognition of the impact on their careers of the first four years following birth or adoption. If necessary, the period of parental childcare leave may be credited to the father.
Finally, up to eight additional quarters of entitlement may be credited to persons bringing up a seriously handicapped child and qualifying for the special education disabled child's allowance (AEEH).
Individuals who have reached the age of automatic entitlement to a full pension regardless of the period of insurance (between 65 and 67), have not completed the total insurance period required for their cohort under all basic schemes included and continue to work will be awarded a 2.5% increase of the total period for each additional quarter worked over the age required to qualify for a full pension.
c) Pension increase
Pensions may be increased for the following reasons:
Increase for raising children
Individuals who have raised 3 children for at least 9 years before their 16th birthday are entitled to a 10% pension increase. The increase is awarded to each parent receiving a retirement pension.
Increase awarded in respect of a dependent spouse
The increase awarded in respect of a dependent spouse is no longer payable as of 1st January 2011. It will continue to be paid to persons who were entitled to it prior to 31st December 2010 and continue to meet the eligibility criteria. The annual amount of the increase is €609.80.
Constant attendance allowance
This increase is awarded to pensioners whose retirement pension replaces a disability pension and to pensioners whose pension is paid or revised for inability to work and who meet the requirements for the increase before reaching the age where they are entitled to a full pension (or between the ages of 65 and 67, depending on year of birth). To be entitled to such an increase, the pensioner must be in need of the constant attendance allowance for help with activities of daily living. This increase is set at €1,107.49 per month as from April 1st, 2017.
d) Minimum and maximum pension levels
- The Solidarity Allowance for the Elderly (Allocation de solidarité aux personnes âgées/ ASPA): This is a means-tested supplement paid to bring pensioners' income up to 803.20 euros per month for a person living alone.
- The Minimum pension (minimum contributif) is granted to those who are entitled to a full-rate pension but paid contributions on a low income. It comes to €7,555.50 per year, or €629.62 per month, and can be paid along with supplements earned due to length of insurance or other factors. Whatever the circumstances, the minimum pension cannot bring the total amount of personal pensions (basic and supplementary) above a certain set amount (€1,145.95)
The basic retirement pension cannot exceed 50% of the social security ceiling (€1,634.50 per month in 2017).
2 - Survivors' entitlements
The reversion pension, like the widowhood allowance, is paid by:
- the regional pension and occupational health funds (caisses [régionales] d'assurance retraite et de santé au travail/ CARSAT),
- the National Old-Age Insurance Fund for Île-de-France (Caisse Nationale d'Assurance Vieillesse d'Île-de-France) for the Paris region,
- the General Social Security Funds (for the Overseas Departments),
- the CSS in Mayotte.
a) Reversion pension
The award of a reversion pension to a surviving spouse or ex-spouse is not automatic but subject to specific conditions of age and income.
Reversion pensions are paid to surviving spouses or surviving former spouses aged at least 55, whose income is below a given level. The income to be taken into consideration is the survivor's personal income or that of the new household in the case of remarriage, civil union (PACS) or common-law union. Persons whose spouse died prior to 1st January 2009 and who fulfilled the qualifying conditions at that date, are entitled to a reversion pension from age 51.
The amount of the reversion pension may not exceed 54% of the deceased spouse's pension or the pension to which the deceased spouse would have been entitled. If the deceased spouse was married several times, the reversion pension is shared among the surviving spouses, prorated based on the number of years of marriage.
The amount of the pension increases by €96.30 per month for surviving spouses with at least one dependent child under 16 years of age. A 10% increase applies for surviving spouses who have raised three or more children.
Persons having reached the qualifying age for a full pension, having claimed the pensions to which they are entitled and whose total pension income does not exceed €2,559.73 per quarter are entitled to an 11.1% increase in the amount of the reversion pension.
b) Widowhood allowance
Under certain conditions, the widowhood allowance is paid to support the surviving spouse until they find a job or go back to work. It is a temporary benefit payable to any person under 55 years of age whose personal income is below a certain level (€2,260.27 per quarter). The amount of the benefit is €602.72 per month.
For the surviving spouse to be entitled to a widowhood allowance, the deceased spouse must have paid old-age insurance contributions during at least three months (consecutive or otherwise) of the twelve-month period preceding their death.
For more information, visit the CNAV's website.
The basic pension program under the general scheme does not provide for an orphan's pension. However, this exists under the supplementary scheme as well as certain special schemes.
B – Compulsory Supplementary Pensions
The employees' supplementary pension schemes are administered by supplementary pension institutions and by the federations heading these institutions.
Supplementary pensions are compulsory for all employees subject to statutory old-age insurance, whether paid through the general social security scheme, the Agricultural Workers' and Farmers' Mutual Welfare Fund or the Miners' Scheme. For private-sector employees, supplementary pensions are administered by ARRCO (Association for Employees' Supplementary Pension Schemes), covering all categories of employees (managerial and non-managerial), and AGIRC (General Association of Retirement Institutions for Executives) covering only managerial and executive staff.
The calculation of supplementary retirement pensions is points-based. Each year, the amount of contributions paid on the basis of a reference salary or income is converted into points, taking into account the latter's unit purchase value for the relevant tax year.
The pension paid to the employee will be contingent upon the number of points accrued during the total period of insurance of the employee and the age at which they retire. To calculate the pension, the number of points accrued is multiplied by value at the time the pension is calculated. In these schemes the amount of the pension is proportional to earnings over the total period of insurance, rather than the 25 best years as applicable in the basic scheme.
Contributions to the ARRCO scheme by non-executives are based on their total earnings up to 3 times the social security ceiling. Managerial and executive employees pay contributions to both the ARRCO and AGIRC schemes: up to one time the social security ceiling to ARRCO and beyond one time this ceiling to AGIRC based on their whole earnings and up to eight times the social security ceiling.
The contribution rate is the point accrual rate multiplied by 125%. The difference between the accrual rate and the contribution rate helps to finance these schemes.
Under both schemes, the normal retirement age is between 65 and 67, depending on date of birth. However, a wage earner may claim an early retirement pension as of the age of 55 or 57 (depending on date of birth). In this case, a reduction coefficient is applied to the pension.
Moreover, when the individual concerned qualifies for full-rate pension under the basic scheme, their supplementary pension is payable without any reduction coefficient being applied.
The calculation of pension points takes account of both paid points and credit points. "Credit points" are credited for employment periods prior to the implementation of the scheme and for periods of unfitness for work lasting longer than 60 consecutive days during which the customer received cash health/ maternity or industrial injury benefits. The same applies if the individual was in receipt of a disability pension. Retirement points are also awarded for periods of receipt of unemployment benefits. The annual values of ARCCO and AGIRC points as of November 1st, 2016, are:
- ARRCO: €1.2513,
- AGIRC: €0.4352.
- If the recipient has raised, or is still raising children, the pension amount may be increased as follows:
- in the ARRCO and AGIRC schemes, an increase of 5% per dependent child under 18 years of age, or 25 if the child is in higher education, undertaking an apprenticeship or seeking employment,
- increase for persons having raised 3 or more children: a 10% increase with respect to periods of insurance completed after 2011. With respect to the insurance history prior to 2011, the amount of the increase depends on the scheme to which contributions were paid. The increase has a yearly maximum of €1,031.15 for the ARRCO scheme and €1,028.12 for the AGIRC scheme (as of April 1, 2015). There is no ceiling if the person concerned was born prior to August 2, 1951.
Both schemes provide pensions for widows, widowers and orphans.
A surviving spouse or surviving former spouse (who has not remarried) may qualify for a reversion pension:
- under both schemes, without any age condition if, on the death of the insured spouse, they have two dependent children aged under 21 (AGIRC scheme) or 25 (ARRCO scheme) or are disabled,
- from the age of 55 in the ARRCO scheme,
- from the age of 60 (or 55 with a reduction) in the AGIRC scheme.
The pension amounts to 60% of the late spouse's accrued entitlement.
Under the ARRCO scheme, a child who has lost both parents can receive a supplementary pension if they are under 21 years of age at the time of their remaining parent's death, or under 25 years of age if they are a dependant of the remaining parent at the time of death. Supplementary pensions are also awarded to orphans aged over 25 who are recognized as disabled before the age of 21.
The orphan's pension amounts to 50% of the accrued entitlement of the late parent for each orphan.
Under the AGIRC scheme, a child who has lost both parents is entitled to a pension up to the age of 21. If the orphan is disabled before the age of 21 they are entitled to a pension regardless of age.
The pension amounts to 30% of the number of points accrued by both parents under the scheme.
For more information, visit the AGIRC ARRCO site.
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