What are the issues behind the COR’s new presentation of projections for the financial sustainability of the pension system?

On Thursday 13th, June 2024, the French Pension advisory Council (or “Conseil d’orientation des retraites” – COR) will publish its annual report. This report will include a new presentation of the projections for the financial sustainability of the pension system, which feed into the public debate and form the basis of reform proposals from all political parties The results of these projections rely heavily on the assumptions made on medium to long-term economic growth. The new feature initiated in response to criticism during the 2023 pension reform will highlight a reference scenario among the different economic scenarios presented, simulated within a range of +0.4% to +1.3% real annual productivity growth.

In his first blog post, Patrick Aubert analyses how this new presentation will change the analysis of the system’s sustainability, and the interpretations and debates will follow.

>> Read the first post entitled The Conseil d’orientation des retraites will now publish its projections using a reference scenario: what changes to expect?

In a second, more conceptual blog post, Patrick Aubert explains what makes our current pension system (and hence the regular debates about its reform) structurally dependent on these growth prospects, and invites us to move beyond this framework by refocusing on the policy objectives of a pay-as-you-go pension system.

According to the author, policy discussions should focus on the way both life expectancy and income are shared, by choosing an effective retirement age in the first case, and choosing a contribution level and a pension level in the second one Once these norms have been defined, the system could be managed by setting explicit, i.e. quantified, targets in the form of trajectories for the three main macroeconomic parameters: the overall contribution rate, the average level of pensions (relative to average work income) and the share of average retirement duration in total life expectancy.

Setting such target paths would ultimately not require prior selection of a reference scenario on which to base the analysis. This could help refocusing the debate on the real social issue behind the discussions on economic assumptions, namely the level we wish to target for retirement pensions.

>> Read the second article entitled What directions for pensions after the publication of the new COR annual report?

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