Discussions surrounding the announced reform of the pension system cannot overlook the issue of family and conjugal rights. These are of crucial importance in reducing pension inequalities between men and women, as the current arrangements are inadequate in many respects. Reports by the Pensions Advisory Council and, most recently, the Moreau report all suggest a ‘complete overhaul’ of these arrangements. To make a meaningful contribution to the debate, the authors have analysed several reform scenarios, quantifying their budgetary cost, their redistributive impact and their potential to reduce pension inequalities between men and women.
Reforming the pension system: family and conjugal rights
This report presents an analysis of several scenarios for reforming family and conjugal rights, quantifying their budgetary cost, their redistributive impact and their potential to reduce pension inequalities between men and women.
Reference IPP Report No. 2
Presentation
Key Results
- The current family-related entitlements do succeed in reducing pension inequalities between men and women, but they do so in a rather ineffective manner and result in a redistribution that is often opaque. Furthermore, the unequal treatment between pension schemes is impossible to justify
- Pension bonuses for families with three or more children are the least justified provision: they do not reduce pension inequalities between men and women and do nothing to compensate for career uncertainties. Several options are available to reform these provisions or make them more compatible with the objective of compensating for career uncertainties, ranging from abolishing the scheme to introducing a flat-rate system. The authors conduct an evaluation of the impact of a flat-rate system either restricted to current beneficiaries or extended to all women from their first child onwards. Such reforms would reduce gender inequality and have a marked redistributive effect in favour of those on the lowest pensions.
- Insurance period bonuses are the main mechanism designed to compensate for the uncertainties of women’s careers. The problem with this scheme stems from the fact that, by compensating only for quarters of insurance coverage – and not for the earnings credited to the account that are included in the calculation of the average annual salary – the insurance duration bonuses do not fully achieve their objectives: some women – typically those who have had careers with few interruptions but a high proportion of part-time work – do not benefit from this mechanism, even though they bear the direct burden of childcare throughout their careers.
- The authors propose a reform of the child-related pension credits and the increases in the period of insurance, which would replace these two schemes with a child-related pension credit, applicable from the first child, that decreases in line with the level of the pension. Such a scheme would better account for career uncertainties, whether arising from a reduction in earnings or a career break, whilst limiting the negative effects on women’s labour market participation and greatly improving the clarity and transparency of the system. Simulations of such a reform suggest redistributive effects in favour of smaller pensions, as well as a reduction in the gender pension gap of around 5 to 6 percentage points – with the budget remaining unchanged.
- An important aspect of any reform of family-related entitlements is extending them to men. Following a ruling by the Court of Justice of the European Union, EU Member States may not maintain schemes that discriminate on the basis of sex, even if the aim is to achieve positive discrimination. The proposal adopted in this report is to offer these pension bonuses per child to a single parent, whether male or female, and by default to the mother. As the bonus is on a sliding scale, the incentive is for the parent with the lower pension – most often the mother – to claim this family entitlement, which is likely to be the most effective way of reducing gender-based pension inequalities.
- Conjugal rights in the French pension system comprise all so-called ‘derived’ entitlements, namely survivors’ pensions. The current system does indeed enable widows to maintain, on average, their standard of living following the death of their spouse. However, this average masks disparities involving overcompensation and, at the same time, net losses in standard of living. These disparities are exacerbated by differences in the design of survivors’ pensions across schemes – which, once again, are difficult to justify.
- The authors examine a reform of the definition of the survivor’s pension that reduces these disparities and proposes a mechanism to guarantee the maintenance of the standard of living in the event of widowhood.
- In the event of divorce, the current situation is governed by access to survivors’ pensions. This arrangement is inadequate in several respects and should be abolished. The most coherent approach to dealing with cases of divorce is the division of pension rights at the time of divorce. The complexity of the French system makes its implementation difficult at first glance, but we propose several approaches, drawing on examples from neighbouring countries, to facilitate such a division.
- Generally speaking, family and conjugal rights under the French pension system suffer not so much from their design as from the underlying complexity of the system itself, which makes the non-contributory mechanisms difficult to understand.
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