The pension reform announced by Mr Emmanuel Macron during the presidential campaign is based on a number of general principles, often summarised by the pledge that ‘every euro contributed entitles the contributor to the same rights’.
As the details of the reform are not yet known, this paper aims to contribute to the public debate by setting out the fundamental principles of a well-designed pay-as-you-go system, regardless of the specific system chosen, and to highlight the trade-offs that must be resolved through democratic debate. We therefore highlight the benefits of indexing pension entitlements to wage growth, and of establishing transparent rules governing the adjustment of benefit rates in line with the country’s demographic conditions.
Nevertheless, there are significant trade-offs to be resolved: what overall contribution rate should be chosen? How should the contribution rates of the various schemes be aligned? How quickly should the transition to the new system take place? How can solidarity mechanisms be improved? And what governance structure should be put in place?
