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Pension reform

Pension reform

Published on September 9, 2010
Statement by Nicolas Sarkozy, President of the Republic, at the Council of Ministers’ meeting

Paris, September 8 , 2010
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The pension reform, which the National Assembly began considering yesterday, is one of the most important for France. At a time when one in ten pensions is paid for by debt, we must assure the French that their pensions and those of their children will be paid.

It is an essential reform. So it is normal for it to trigger concerns and significant strike action, as was the case yesterday. It’s one of the functions of the trade union organizations to call for demonstrations and strikes. I am conscious of the concerns being expressed in this way. Just as I am conscious of the disruption it causes those using public services. This is why we brought in the requirement for a minimum service on public transport [in the event of strikes], which has always been fulfilled since 2007.

By asking the government to get the pension reform through, I am shouldering my responsibilities. The Head of State’s duty isn’t to ignore difficulties or leave his successors the task of resolving them. On the contrary, it’s to look at the situation as it is and provide lasting, fair solutions. This is also why I had said before the summer that I was ready to supplement the government’s plan on several points, particularly by taking account of the gruelling nature of some jobs, with due regard for the overall balance of the reform.

The first plank of this reform is a new legal retirement age. It will be gradually increased, by four months per year, to 62 by 2018, while the age at which early retirement does not lead to reductions in a retiree’s pension will be increased at the same rate between now and 2023.

There is no question of reconsidering this. Let me remind you that there are three possible ways of financing pensions: the first is to lower retirees’ pensions. I refuse to do this. The second is massively to increase compulsory contributions. I refuse to do this too because it would reduce purchasing power, destroy growth and jobs and encourage offshoring. Finally, the third way is to work a bit longer. This is the most reasonable way, the one every other country has chosen and which the government has adopted because we are living longer: since 1950, our life expectancy has gone up 15 years.

The reform’s second plank is not to ask the same effort from everyone since in order to be fair we have to take account of the fact that some people have harder working lives than others. So the bonus for working extra years created in 2003 will be maintained and broadened: every one who entered the labour market very young, i.e. before the age of 18, and has the requisite number of qualifying years [to claim a full-rate pension], will, as before, be able to retire at 60, or even earlier. I am asking the government to improve the mechanism in order to avoid any threshold effect and consequently enhance fairness between generations. This will cost our retirement schemes another €350 million.

Not asking the same effort of everyone also means taking account of the gruelling nature of some jobs, which no other European country has so far done. The bill provides that for any insured person with a 20% or higher degree of disablement the earliest legal retirement age will remain 60. We can go further. As Eric Woerth has suggested to me, following the discussions with the social partners, and in agreement with the Prime Minister:

- I would like this mechanism to be extended to farmers and farm workers;
- I would like anyone with a 10% degree of disablement to be able to defend his/her rights before a multidisciplinary commission. On the basis of the information the employee has presented to it, this commission will be able to decide to grant him/her the benefit of retirement at 60;
- I would like industry sectors and individual companies to start negotiations on proposals to modify during their final years the working conditions of employees who have had gruelling jobs, e.g. by working part time or mentoring. These industries and companies will be able to count on the financial support and consultancy services of an experimental public fund. A progress report on these measures will be drawn up in 2014;
- finally, a scientific committee will be created to make rapid progress in our knowledge of the so-called deferred impact of working in some physically demanding jobs so that we can take all the consequences on board.

But we cannot content ourselves with compensating for the physically exhausting nature of some jobs. The most important thing is to prevent it. This is why the bill will launch the reform of workplace medicine and ask firms to negotiate agreements or draw up action plans on prevention. Failure to do so will incur penalties.

The third plank of the reform is to strengthen the solidarity of our pension system by increasing taxes on high incomes, dividend income and capital gains, and employers, which as early as next year will bring in nearly €4 billion extra revenue.

Finally, we have pledged to bring the rules for the public sector in line with those for the private sector since this is a matter of fairness. Not only will the rise in the legal retirement age apply to all insured persons but we are also narrowing the differences between the rules applying to public employees and those of the other workers. In particular, this has led us to close the scheme allowing public employees with 3 children and 15 years’ service to take their pensions early. But no one must see their life projects upset. This is why we will propose that any public employee who is 5 years or less from the legal retirement age and intended taking advantage of this scheme will be able to do so in the same conditions as at present.

Fairness also requires us to deal with the question of those relying on more than one pension. In particular I would like us to stop penalizing those who spend part of their working lives in the public sector and part in the private sector.

On these bases, the Prime Minister and I are asking Eric Woerth to present the government’s amendments to Parliament as soon as possible.

I remind you that there is no question of allowing anyone to distort the reform since that would endanger the plan to get our pension scheme budget back into balance. Our first objective is to save our pay-as-you-go system and thereby guarantee our fellow citizens that the post-war social pact is still alive and kicking./.

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