In what situation are the proper supplementary pension schemes for employees (ARRCO) and executives (AGIRC)? Is it really sound the alarm to ensure sustainability? Are solutions (yet) possible? The Court of Auditors has delivered Thursday, December 18 a large fairly comprehensive report on the future of supplementary pensions in an attempt to answer these questions. Provided that, as pointed out Didier Migaud, First President of the Court of Auditors, it is not for this institution to replace the managers of the schemes – the employer and employee organizations – but simply to make recommendations and to “put on the table” all possible data to meet the financial challenge that face Arrco and Agirc. Overview.
Role and status of Agirc and Arrco
Both plans cover more than 18 million employees and nearly 12 million retirees. They pay every year more than 70 billion pensions. Instrument established by negotiation in 1947 and 1961, the AGIRC and ARRCO schemes are managed and controlled solely by the social partners (employers and trade unions). Their annual expenditures constitute more than 6.5% of French public spending.
The Court emphasized the excellent management of these plans until recent years. Thus, through measures of large magnitudes initiated in 1993, the two systems will experience between 1998 and 2008, eleven years of surpluses, that is to say, to collect more premiums they have paid pension . They thus accumulated more than 60 billion euros in reserves.
But since 2009, the situation deteriorated. First because of the sharp slowdown in economic growth and rising unemployment. This has led to an almost zero increase in payroll. Now the Agirc / Arrco contributions are based on the payroll. Th en we are witnessing the retirement of many generations after the war, the famous the “baby boom”. This leads to a structural deterioration of contributors / pensioners ratio. A Agirc and Arrco there currently 0.6 reprocessed to a contributor, in 2040 there will be 0.8 Arrco retired to a contributor and retired for a 0.9 Agirc contributor.
Financial Perspectives highly degraded
The result Agirc and Arrco are in deficit for 5 years. In 2013, this imbalance reached 4.4 billion euros, or more than 6% of expenditure. To ensure continuity of pension payments, it was necessary to call on financial reserves. Otherwise, retirees would have seen the amount of their very amputated withdrawal of pensions. Indeed, for an employee paid during his career at the median wage (currently 2,160 euros gross per month), supplementary retirement pension will represent a quarter of its total pension of 360 euros per month. For paid under 5,400 gross per month, the average salary for managers, supplementary pension represent 1,400 euros per month, which is half of the total pension. According growth scenarios considered, more or less optimistic The annual plan deficits could reach 4 or 7 … or € 20 billion until 2040. Under these conditions, according to the growth assumptions, Arrco might have exhausted its reserves in 2025. For ‘Agirc is worse, the lack of reserves could occur as early as 2018 already … but with less than three months of reserve allocations by 2016. So there is fire.
What measures decided?
Employers and unions will meet in February to negotiate emergency measures. They must normally make their copy to the end of June. For its part, the Court of Auditors has expressed a number of suggestions for saving schemes.
First, the Court notes that the payment of pensions Agirc can not be guaranteed after 2017 if an effort specifically requested to executives. However, if managers had to bear alone the effort, they would experience between 2015 and 2017, a reduction of more than 10% of the purchasing power of their pensions Agirc.
To cushion the blow, the Court suggests merge Agirc and Arrco to allow a “fungible financial reserves.” However, this can only be done by ensuring equal treatment between executives and non-executives. We must therefore harmonize returns offered by the plans “that is to say, the relationship between the level of the pension obtained and the amount of contributions paid.”
Similarly, Court questions the level of pensions. Certainly, it recognizes that the social partners have already decided in a March 2013 agreement almost freezing of pensions (lower annual revaluation of a point at inflation) via a “floor clause” … but with very current low inflation, the expected savings are not at the rendezvous. Result, retirees are weakly affected by this clause, most of the current efforts are based on employees as the social partners had also decided an increase in supplementary pension contribution of 0.1% on 1 January 2014 and again from 0, 1% on 1 January 2015. The Court therefore suggests a “reconsideration” of the “floor clause” … way of saying that we should not refrain lower pensions. But it is
on wind conditions of the pension that the Court of Auditors advance of the boldest recommendations. It considers “ the fact that excluding a priori to postpone retirement would limit the room for maneuver of the social partners, if they were attached to repel the horizon of depletion of reserves beyond 2030″ .
In other words, a disconnection with the retirement conditions applicable to the general system (currently 62 years) should not therefore be excluded from consideration possible levers. Legally, it is true that the supplementary pension Retirement age is absolutely not obliged to “stick” to that necessary to collect the basic pension served by Social Security. But in fact, in view of the importance of the part served by supplementary pensions in the total amount of the pension, it will lead to delay the de facto retirement of employees.
Court Counts took a practical example. It is based on the assumption of a decline in the retirement age of one year (63 years instead of 62 years) and an extension of premium increases (0.1%) and sub -indexations pensions until 2020. That would delay the depletion of reserves beyond 2035 while limiting the increase in contribution rates was + 0.9% compared to 2013 and the loss of power to purchase 7% …
Finally, the Court stressed the need to fight against fraud or errors to supplementary pension contributions, which, according to a study of the ACOSS (Social Security) represent up to two billion euros. It advocates that Urssaf agents can participate in the control.
The debate will therefore engage in February between employers and unions. They have, with the report of the Court of Auditors, many data and ways to “save” supplementary schemes which are an important pillar of the French social pact. Many people would like to see pillar collapse to give way to another plan … by capitalization.
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