Pensions in France

Pensions in France fall into five major divisions;

• Non-contributory Minimum Pension
• Mandatory state pension Provision
• Mandatory Occupational Pension Provision
• Voluntary Private Collective Pension Provision
• Voluntary Private Individual Pension Provision.

Non-contributory Minimum Pension

This minimum pension (Allocation de Solidarité aux Personnes Âgées or Minimum Viellesse in French) is the first level of the 1st Pillar of the French pension system. It is a non contributory pension introduced in 1956.

It is targeted at people between 60 & 65 years old who have not been in paid work either for health reasons or because they were carers. It is available to both French and foreign citizens residing in France legally.

In order to qualify a single person must have less than 7635 € and 13374€ for a couple.

In 2010 the annual pension amounts to 8507€ for a single person and 13890€ for a couple.

Amounts paid can be recovered by the state at the death of the beneficiary if the inheritance left is over 39,000€.

Mandatory state pension Provision

The mandatory state pension is an unfunded contributory penison based on redistribution of contributions from those working to those in retirement. The scheme aims to provide up to a maximum of 50% of the retirees highest earning years up to a limit of 35,000€ annually (in 2010).

The contributions are levied on employees pay and approximately 6.65% is paid by the employee and 8.3% paid by the employer. Management of the scheme is the responsibility of the Caisse Nationale d'Assurance Viellesse (National Old-age Insurance Bank).

Mandatory Occupational Pension Provision

The mandatory occupational pension is a defined contribution scheme that is mainly based on redistribution, but that also has elements of investment. The aim of the schemes is to supplement the state pension increasing income of retirees from the 50% level to between 70% and 80%.

There are several schemes, the main ones being: – Arrco (for non-managers) – Agirc (for managers) – Ircantec (for civil servants) One third of this contribution is paid by the employee and the other two thirds by the employer.

Contributor	Income levied	Agirc	Arrco	Ircantec
Employee
	First tranche of income	3%	none	1.5%
	Second tranche of income	8%	7,7%	4.76%
Employer
	First tranche of income	4.5%	none	3%
	Second tranche of income	12%	12.6%	9.24%

• First Tranche is up to 35,000€ in 2011

The schemes pay out based on a points system. The schemes are managed so that they are non-loss making. Surpluses are invested in the financial markets and are maintained as a reserve fund. This reserve fund amounts to approximately 50 Bn € in 2010.

Voluntary Private Provision

Collective Plans

The Collective retirement savings plans (plan d'épargne pour la retraite collectif) were introduced by Francois Fillon in 2006. They are company plans that enable employees to get tax credits when they contribute to these funds.

Employee contributions are strictly regulated. The following is a list of the sources of funds that may be used to contribute to these funds:

• Bonuses
• Profit sharing
• Voluntary payments up to 25% of total gross earnings
• Compay contributions up to 16% of the social security limit (35,000€ in 2011)
• Transfers from other company savings schemes

All the contributions (employee and employer) are not considered as income for income tax purposes. At retirement the capital is not taxable (income tax), however the annuities are taxable as income.

Individual Plans

The Popular retirement plans (Plan d'épargne retraite populaire) were created in 2004. 10% of annual income may be invested tax free in these individual funds.

Pensions Reserve Fund

The Pensions Reserve Fund (Fonds de réserve pour les retraites) was set up in July 2001 with the aim of using funds from privatisations of state holdings to finance the future shortfall of the state PAYG system. The target was to create a fund totaling 150 Bn€ by 2020. As of September 2010 the total funds managed by the fund amounted to 35.7 Bn€.

See also

• Social Security in France