Pension reform: old age insurance accounts in the red

The deficit of the general scheme for private sector employees combined with that of the Old Age Solidarity Fund will exceed 4 billion euros this year and next year. In question: the slowdown in growth and the post-“yellow vests” measures.

The High Commissioner for Pensions, Jean-Paul Delevoye, is facing a more difficult financial situation than expected.  Especially since Emmanuel Macron has set the goal of balancing the accounts by 2025.

Emmanuel Macron had ruled out in July the savings measures planned on pensions in the Social Security budget for 2020. Exit the acceleration of the increase in the contribution period provided for by the Touraine law, exit also the early introduction of a “pivotal age”. There is no question of targeting the social partners, and in particular the CFDT, as the second phase of consultation on the pension reform aimed at creating a universal system from 2025 begins.

No return to equilibrium on the horizon

Two months later, it’s time to take stock and they are not good. The Social Security draft budget for 2020 to be presented on Monday confirms a serious financial degradation. The deficit of the general scheme and of the Old Age Solidarity Fund (FSV) – which notably finances the pension rights of the unemployed – should reach 5.4 billion euros this year, whereas a year earlier, it was a balance that was anticipated.

And for 2020, the deficit will hardly decrease, to 5.1 billion euros. And this despite a target of increased health insurance spending reduced to 2.3%, implying a little more than 4 billion in savings. The return to equilibrium is at best postponed to 2023.

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In this gloomy picture, which contrasts with the anticipated surpluses at the start of the five-year term, old-age insurance is particularly affected. The general scheme for private sector employees (CNAV) should experience a deficit of 2.1 billion euros in 2019 and, with the imbalance of the FSV (2.3 billion), it is therefore a deadlock of 4.4 billion euros. euros which is expected this year for the old age branch, against 1.6 billion in 2018. And it will not be much better next year, with a deficit of the CNAV expected to 2.7 billion, and a partial recovery of the FSV (deficit reduced to 1.4 billion).

The diluted effects of the Sarkozy reform

In question, the slowdown in growth and the wage bill. The Macron bonus of 1,000 euros without charges in companies, renewed in 2020 (on condition of having a profit-sharing agreement), also reduces the income from contributions.

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The old age branch is also very affected by the measures decided during the “yellow vests” crisis: the anticipation of the exemption from contributions on overtime (1.2 billion) and the backtracking on the increase in CSG for retirees receiving more than 2,000 euros per month (1.5 billion) weigh on the accounts of 2019, and these measures will not be compensated by the State. Next year, it will also be necessary to finance the reindexation of pensions below 2,000 euros, while significant savings were initially planned with this freeze. In addition, the flow of retirements is no longer slowed down by the reduction in the retirement age from 60 to 62, which has now been completed.

The Delevoye reform under financial pressure

These new financial forecasts will revive the debate on the need to take recovery measures on pensions before the entry into force of the reform. They will be integrated by the Retirement Orientation Council, mandated by the government to make an updated and more precise inventory of the financing needs of pension plans until 2030.

Emmanuel Macron recalled at the end of August that the future universal system should start with balanced accounts. In its annual report published in June, the COR forecast a deficit of 0.4 point of GDP (around 9 billion) by 2022 for all pension schemes.