French workers can retire much younger than most. That’s about to change | CNN Business

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The French government is planning to raise the official retirement age by two years as part of a long-delayed reform to the country’s pension system that was met with huge protests by labor unions the last time it was attempted.

New legislation will require French citizens to work until 64, from 62 currently, to qualify for a full pension. From September this year, the regular retirement age will increase by three months a year until 2030.

The higher retirement age should tackle a pension funding deficit, Prime Minister Élisabeth Borne told reporters on Tuesday as she laid out the reforms.

“I am well aware that changing our pension system raises questions and fears among the French people,” she said, but added that allowing the deficit to grow would be “inexcusable.”

Other changes announced by Borne include increasing the minimum monthly pension allowance and counting maternity leave towards a woman’s years of work. Those who started work below the age of 16 will be entitled to retire at 58, she said.

Starting in 2027, a person will have had to have worked for 43 years to receive full state pension benefits.

Revamping the pensions system has been a key element of French President Emmanuel Macron’s election campaigns.

“The goal is to consolidate our pay-as-you-go pension plans, which would otherwise be threatened as we continue to finance on credit,” he said in a New Year speech.

France spends more than most other countries on state pensions at nearly 14% of GDP in 2018, according to the Organization for Economic Cooperation and Development.

In 2019, it had the highest welfare spending of any country in the European Union at nearly 34% of GDP, according to Eurostat. That compared with 28% across the European Union as a whole.

The government argues that changes are necessary to make the system financially sustainable.

“Government agencies predict massive deficits in the coming years, as boomers continue to retire, and they need to make changes very quickly otherwise they will lose money to invest in other things,” said Renaud Foucart, a senior economics lecturer at Lancaster University in England.

Raising the retirement age to 64 will keep France below the norm in Europe and in many other developed economies, where the age at which full pension benefits apply is 65 and increasingly moving towards 67.

In the United States and the United Kingdom, the retirement age is between 66 and 67, depending on the year in which you were born. Current legislation sets a gradual rise to 68 in Britain between 2044 and 2046, although that is being reviewed and could change.

Still, pension reform in France is “very unpopular,” according to Foucart. “It’s seen as taboo,” he added.

The passage of the reforms is all but assured, despite Macron’s party lacking an absolute majority in the French parliament. In the absence of support from opposition lawmakers, the government could turn to Article 49.3 of France’s constitution, a mechanism it has used several times already to push through budget-related bills without putting them to a parliamentary vote.

Labor unions have vowed to oppose the new law, which comes just months after strikes by workers demanding higher pay caused fuel pumps to run dry across the country.

An earlier attempt by Macron to revamp the pensions system was met with nationwide strikes in 2019 before being abandoned during the Covid-19 pandemic.

CFDT, France’s biggest union, has already threatened protests in response to the latest reforms.

“If the retirement age is pushed back to 65 or 64, the CFDT will do what we have been saying since the beginning, we will resist this reform by mobilizing, by calling on workers to mobilize,” CFDT head Laurent Berger said last week, France’s Le Figaro newspaper reported.

Workers in France have been squeezed by rising food and energy bills, and thousands took part in mass demonstrations against the cost of living on the streets of Paris last year.

— Marguerite Lacroix and Joseph Ataman contributed to this report.