The French Social Security System III - Retirement

2018

In France, private-sector employees' basic pensions are topped up by the compulsory supplementary pensions ARRCO-AGIRC, which, are also financed on a pay-as-you go basis.

A - Basic scheme

Basic pensions under the general scheme are awarded by:

  • The (regional) retirement and occupational health funds (caisses d'assurance retraite et de santé au travail/ CARSAT),
  • the Île-de-France national old-age insurance fund (caisse nationale d'assurance vieillesse d'Île-de-France) for the Paris region,
  • the general social security funds (caisses générales de sécurité sociale/ CGSS) for the overseas Departments,
  • the CSS in Mayotte.

1-Eligibility requirements

a) Retirement age

In France, a worker can retire once they have reached statutory retirement age. The 2010 pension reform gradually increased this age requirement by two years.

  • Statutory retirement age: 62*

Workers are not required to claim their pension at 62. Indeed, they can get a higher pension (rate increase) by continuing to work beyond the legal minimum retirement age and who have paid contributions for longer than the qualifying period for a full pension.

  • Full-rate retirement age: 67* (statutory age + 5 years)

*for those born on January 1st, 1955 or later

Early retirement is possible for those with a disability, a long career, or a history of arduous work.

b) Calculation of the pension (careers with only general scheme membership)

The amount of the pension depends on three factors:

  • Basic salary or Average Annual Earnings (SAM): average annual earnings are the adjusted earnings on which contributions have been paid. The SAM is calculated on the basis of the insured's 25 best-earning years.
  • Payment rate: the maximum rate of 50% is reduced by a percentage determined by the difference between the number of quarters credited and the number of quarters required to receive the maximum rate, with consideration for individual's age and total period of insurance. The most advantageous calculation for the individual is used. The minimum rate is 37.5%.
  • The total length of insurance, including periods credited as periods of insurance, is used to determine the payment rate of pensions paid between the legal minimum retirement age and the age of automatic entitlement to a full pension (between 62 and 67 for persons born after 1st January 1955). The 50% full rate is payable to individuals having a total insurance period of 166 to 172 quarters (depending on year of birth), aged over 67 (for persons born after 1955) or belonging to specific categories (persons unfit for work, former veterans or prisoners of war and female workers who have raised at least three children).

The total period of insurance, which is used to determine the rate at which the pension will be paid, includes both periods of contributions paid to the various basic schemes (see Article L. 351-1 of the Social Security Code) and periods treated as such, i.e. periods of cessation of work in the case of sickness, maternity, disability, industrial injury, military service, unemployment, etc.

Periods of employment abroad:

Periods of work abroad in a state with which France has a social security agreement may in certain conditions be taken into account for the purpose of determining the pension payment rate.

Under French legislation, the periods of work abroad completed prior to 1st April 1983 for which buyback contributions can or could have been made, are counted as credited periods of insurance when determining the pension payment rate once the person concerned has reached the legal minimum retirement age (Article R. 351-4 of the French Social Security Code).

The total insurance period is the actual length of insurance (contribution periods and periods treated as such) under the insurance scheme. With the different reforms, the period of insurance required for a full-rate pension has increased progressively 166 quarters for persons born from 1955 to 1957. The required length of insurance then increases by one quarter for each 3 birth years, going up to 172 quarters for those born in or after 1973.

Thus, for an individual born in 1955, the pension calculation formula will be as follows:

  • Average yearly salary (25 best years) X rate (between 37.5 and 50%) X total length of insurance under the general scheme / 166 quarters (maximum length of insurance taken into account depending on birth year)
Early retirement pension

Under certain circumstances, it is possible to retire early without a reduction in pension rate:

  • Retirement from arduous work: this includes an opportunity for workers to retire up to two years before the statutory retirement age (or at age 60 rather than 62). Indeed, 8 quarters of insurance can be credited to an insured who has acquired arduous work account points for exposure to one or more industrial risk factors over a given period.

The arduous work risk prevention account (“compte personnel de prevention de la pénibilité”/ C3P) that was rolled out in 2015 has been amended by government order No. 2017-1389 of September 22, 2017. It is now called the job risk prevention account (“compte professionnel de prévention”/ C2P) and only recognizes 6 exposure factors (compared with 10 previously).

  • People with many years of service may retire at age 60 or before if they can demonstrate a minimum length of insurance and contributions and began working at a very young age. The required minimum length of insurance varies depending on birth year, age at retirement, and age at which the retiree began working.
  • People with a disability may retire between ages 55 and 59 provided that they have a permanent disability percentage of at least 50% or have official disabled-worker status before December 31, 2015. They must also have, a certain length of insurance (including a minimum duration of employment-related contributions) during the period in which they were disabled. The required minimum length of insurance varies depending on birth year and expected age at retirement.
Reduced-rate pension (rate reduction)

People who wish to draw their pension but do not have the qualifying period of insurance for a full pension will receive their pension at a reduced rate. The percentage reduction is determined by the number of missing quarters and the generation to which the insured belongs: 1.625% for persons born in 1950, 1.5% for persons born in 1951, 1.375% for those born in 1952 and 1.25% for those born from 1953 (i.e. a decrease of 0.625 for each missing quarter). The pension will continue to be paid at the reduced rate from then on.

Increased pension rate

Individuals with the requisite period of insurance for a full pension, and who continue working after the legal minimum retirement age (between 60 and 62 depending on the year of birth), qualify for a pension increase. This provision is applicable as of 1st January 2004, with different rates depending on the period during which the contributions were paid. For quarters completed after 1st January 2009, the rate of increase is 1.25% for each additional quarter.

c) Increases in length of insurance

Child-related increase

A parent can be awarded a length of insurance increase of up to 8 quarters per child:

  • 4 quarters for maternity leave (90 days of daily benefits accrue a quarter) or adoption,
  • 4 quarters of child-rearing over the 4 years that follow the child's birth or adoption.

For children born after January 1st, 2010, additional quarters for adoption and child-rearing can be shared between the parents. Indeed, they can determine who accrues the additional quarters or how the additional quarters will be shared within a 6-month period following the 4th anniversary of the child's birth or adoption.

Up to eight additional quarters may be credited to persons bringing up a child with a severe disability who and qualifies for the special education disabled child's allowance (AEEH).

Delaying retirement

An individual can reach full-rate retirement pension age (between ages 65 and 67 depending on their birth year) but not have accrued the required length of insurance for entitlement to a full pension (all basic schemes combined). They can increase their length of insurance by delaying retirement beyond that age (whether or not they continue to work). In this case, their length of insurance will be increased by 2.5% for each trimester retirement is delayed.

d) Pension increase

Pensions may be increased for the following reasons:

  • Increase for raising children: Individuals who have raised 3 children for at least 9 years before their 16th birthday are entitled to a 10% pension increase. The increase is awarded to each parent receiving a retirement pension.
  • The dependent-spouse increase is no awarded as of 1st January 2011. It will continue to be paid at a rate of € 609.80 / year to persons who were entitled to it prior to that date and continue to meet the eligibility requirements.
  • The caregiver's increase is awarded to pensioners whose retirement pension replaces a disability pension and to pensioners whose pension is paid or revised for inability to work and who meet the requirements for the increase before reaching the age where they are entitled to a full pension (or between the ages of 65 and 67, depending on year of birth). To be entitled to such an increase, the pensioner must be in need of the constant attendance allowance for help with activities of daily living. As from April 1st, 2018, the amount of this increase cannot be less than € 1,118.57 per month.

e) Minimum and maximum pension levels

  • The Solidarity Allowance for the Elderly (Allocation de solidarité aux personnes âgées/ ASPA): This is a means-tested supplement paid to bring pensioners' income up to € 833  per month for a person living alone.
  • The Minimum pension (minimum contributif) is granted to those who are entitled to a full-rate pension but paid contributions on a low income. It comes to € 7,615.94 per year, or € 634.66 per month, and can be paid along with supplements earned due to length of insurance or other factors. Whatever the circumstances, the minimum pension cannot bring the total amount of personal pensions (basic and supplementary) above a certain set amount (€ 1,160.04)

The basic retirement pension cannot exceed 50% of the social security ceiling (€ 1,655.50 per month in 2018).

f) Those with multiple pensions:  the single pension claim for aligned  scheme  members (“liquidation unique des régimes alignés”/ Lura)

Lura was rolled out on July 1st, 2017, and does not apply:

  • To individuals who had already claimed one of their pensions of the same type from one of the aligned schemes prior to that date,
  • To farmers, private-practice professionals, nor to the special schemes that are not “aligned,”
  • To individuals born before 1953.

The pension reform of January 20, 2014, instituted the single pension claim system (Lura) for individuals who have belonged to at least 2 of the following so-called “aligned” schemes:

  • The general salaried workers' scheme (“Régime général des salariés”/ RG)
  • The agricultural employees' scheme (“Régime des salariés agricoles”/ SA),
  • The self-employed workers' scheme (craftsmen, merchants, manufacturers).

Through Lura, these individuals, who are also referred to as “multiple-pension recipients,” are only required to submit a single pension claim and only receive a single pension (rather than several as before).

An individual can submit a pension claim to any of the pension funds to which they have belong. The funds then work together to compile the information needed to process the claim and calculate the pension.

In general, the competent scheme to calculate and pay the applicant's pension is the last one to which they belonged. However, priority rules may apply instead: this is the case when the insured was last a member of two aligned schemes at the same time or when Lura does not apply to their last scheme of membership.

The pension is then calculated and awarded by the competent scheme pursuant to its own rules and policies.

Calculation formula :

  • Pension = Average annual income X rate X accrued length of insurance / maximum length of insurance taken into account
  • Average annual income: the sum of the individual's average salaries and income for their 25 best years under all aligned schemes combined. This sum must not exceed the amount of the applicable annual social security ceiling for each year being counted.
  • Rate: between 37.5 and 50%. When the rate is determined based on length of insurance, length of insurance and equivalent periods accrued under the aligned schemes to which Lura applies are counted in addition to length of insurance under the other compulsory schemes to which the individual has belonged. The number of quarters credited under these schemes cannot exceed 4 per calendar years.
  • Accrued length of insurance :total of all quarters credited to the individual's account under the aligned schemes to which Lura applies

2 - Survivors' entitlements

Reversion pensions, like the widowhood allowance, are paid by:

  • the regional pension and occupational health funds (caisses [régionales] d'assurance retraite et de santé au travail/ CARSAT),
  • the National Old-Age Insurance Fund for Île-de-France (Caisse Nationale d'Assurance Vieillesse d'Île-de-France) for the Paris region,
  • the General Social Security Funds (for the Overseas Departments),
  • the CSS in Mayotte.

a) Reversion pension

Reversion pensions are intended for surviving spouses and ex-spouses. They are not awarded automatically but subject to specific age and income tests:

  • The surviving spouse or ex-spouse must be at least 55 years old (51 if the death occurred prior to January 1st, 2009).
  • The survivor's personal income or that of the new household in the case of remarriage, civil union (PACS) or common-law partnership.

The amount of the reversion pension may not exceed 54% of the deceased spouse's pension or the pension to which the deceased spouse would have been entitled. If the deceased spouse was married several times, the reversion pension is shared among the surviving spouses, prorated based on the number of years of marriage.

The amount of the pension increases by € 96.30 per month for surviving spouses with at least one dependent child under 16 years of age.

A 10% increase applies for surviving spouses who have raised three or more children.

Persons having reached the qualifying age for a full pension, having claimed the pensions to which they are entitled and whose total pension income does not exceed €860.08 € per month are entitled to an 11.1% increase in the amount of the reversion pension.

b) Widowhood allowance

The widowhood allowance can be paid for 2 years to any person under 55 years of age whose personal income is below€  759.43  per month and whose spouse paid old-age insurance contributions for at least three months (consecutive or otherwise) over the twelve-month period preceding their death.

The widowhood allowance is paid at a rate of € 607.54 per month.

For more information, visit L'assurance Retraite's website.

c) Orphans

The basic pension program under the general scheme does not provide for an orphan's pension. However, this exists under the supplementary scheme as well as certain special schemes.

B - Compulsory supplementary pensions

The employees' supplementary pension schemes are administered by supplementary pension institutions and by the federations heading these institutions.

Supplementary pensions are compulsory for all employees subject to statutory old-age insurance, whether paid through the general social security scheme, the Agricultural Workers' and Farmers' Mutual Welfare Fund or the Miners' Scheme. For private-sector employees, supplementary pensions are administered by:

  • ARRCO (Association for Employees' Supplementary Pension Schemes), covering all categories of employees (managerial and non-managerial),
  • and AGIRC (General Association of Retirement Institutions for Executives) covering only managerial and executive staff.

1 – Contributions

Non-managerial or executive staff pay contributions to the ARRCO scheme based on all of their earnings up to 3 times the monthly social security ceiling.

By contrast, managerial and executive staff pay contributions:

  • to the ARRCO scheme on earnings up to the monthly social security ceiling,
  • and to the AGIRC scheme on earnings in excess of that ceiling up to 8 times the monthly social security ceiling.

Under these supplementary schemes, pension amounts are calculated based on a point accrual system.

2 – Accruing points

Each year, the amount of contributions paid on the basis of a reference salary or income is converted into points, taking into account the latter's unit purchase value for the relevant tax year.

The contribution rate is equal to the point accrual rate multiplied by 125%. The difference between the accrual rate and the contribution rate goes to finance the schemes (see social security contribution rates and ceiling).

In addition to these points accrued through contributions, points can be credited without payment of contributions :

  • for periods of employment accrued before the scheme became applicable,
  • for periods of unfitness for work lasting more than 60 consecutive days for which the insured drew daily health, maternity, or industrial accident insurance benefits.
  • periods for which the insured drew a disability pension
  • periods for which the insured drew unemployment benefits.

3 – Claiming a pension

The pension paid to the employee will be contingent upon the number of points accrued during the total period of insurance of the employee and the age at which they retire.

Age

Under these two schemes, the normal retirement age is between 65 and 67, depending on the member's birth year. However, a wage earner may claim an early retirement pension as of the age of 55 or 57 (depending on date of birth). In this case, a reduction coefficient is applied to the pension.
Moreover, when the individual concerned qualifies for full-rate pension under the basic scheme, their supplementary pension is payable without any reduction coefficient being applied.

Amount

Under these points-based systems, the amount of the pension is proportional to the member's earned income over their entire career, not just their 25 best-earning years as is the case for the basic scheme.

The amount of the pension is calculated by multiplying the number of points accrued by the value of the point at the time the pension is claimed.

Point values as of November 1st, 2017:

  • ARRCO: € 1.2513,
  • AGIRC: € 0.4352.
Child-rearing top-up

If the recipient has raised, or is still raising children, the pension amount may be increased as follows:

  • in the ARRCO and AGIRC schemes, an increase of 5% per dependent child under 18 years of age, or 25 if the child is in higher education, undertaking an apprenticeship or seeking employment,
  • increase for persons having raised 3 or more children: a 10% increase with respect to periods of insurance completed after 2011. With respect to the insurance history prior to 2011, the amount of the increase depends on the scheme to which contributions were paid.

4 - Survivors

Both schemes provide pensions for widows, widowers and orphans.

Surviving spouse

A surviving spouse or surviving former spouse (who has not remarried) may qualify for a reversion pension:

  • Without any age requirement if, on the death of the insured spouse, they have 2 dependent children or are disabled,
  • from the age of 55 in the ARRCO scheme,
  • from the age of 60 (or 55 with a reduction) in the AGIRC scheme.

The pension amounts to 60% of the late spouse's accrued entitlement.

Orphans

Under the ARRCO scheme, a child who has lost both parents can receive a pension based on the deceased's entitlement:

  • if they are under 21 years of age at the time of their remaining parent's death, or under 25 years of age,
  • or if they are under 25 and a dependant of the remaining parent at the time of death,
  • or above age 25 if they have been recognized as disabled before the age of 21.

Amounts: 50% of the late parent's ARRCO pension entitlement and 30% of his/her AGIRC pension entitlement.

For more information.