The French Social Security System III - Retirement

2019

In France, private-sector employees' basic pensions are topped up by the compulsory supplementary pension scheme ARRCO-AGIRC, which is 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

  • 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 1957, the pension calculation formula is 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 on the basis of arduous work: this allows workers to retire up to 2 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 job risk prevention account (“compte professionnel de prévention”/ C2P) recognizes 6 exposure factors:

  • Work in hyperbaric conditions,
  • Extreme temperatures,
  • Noise,
  • Nighttime work,
  • Consecutive rotating shift work
  • Repetitive work
  • 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.

To learn more about early retirement: lassuranceretraite.fr

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 qualify for a pension increase. Applicable rates differ as determined by when these periods of employment were accrued. 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 (67) 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 (67). 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 € 868.20 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 € 636.56 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 (€ 1,177.44)

The basic retirement pension cannot exceed 50% of the social security ceiling (€ 1,688.50 per month in 2019).

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 pensions

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 must not exceed a given ceiling (20,862.40 € per year for a person

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 surviving spouse can be awarded a pension increase of 97.36 € per month if s/he has at least one child under the age of 16 and is not drawing a personal retirement pension.

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 €862.64 € per month are entitled to an 11.1% increase in the amount of the reversion pension.

* Civil unions (“Pacs”) and de facto partnerships (“concubinage”) do not entitle the surviving partner to a 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 € 2,312.43 per quarter 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 € 616.65 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 pension scheme

Membership in a supplementary retirement pension scheme is 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 the Agirc-Arrco scheme, which is the result of the January 1, 2019, merger of the ARRCO scheme(Association for Employees' Supplementary Pension Schemes), covering all categories of employees, with the Agirc scheme (General Association of Retirement Institutions for Executives), covering only managerial and executive staff.

Like the basic retirement pension scheme, Agirc-Arrco functions on a pay-as-you-go basis: the contributions paid by salaried workers and the employers are immediately used to pay current retirees’ pensions.

It is a point-based system: each year, an individual’s contributions are converted to retirement pension points and added to his/her account. To calculate the amount of your retirement pension, just multiply your number of points by the value of the point, which is determined each year.

1 – Contributions

Supplementary retirement pension contributions are calculated based on the pay components that go into the Social security contribution basis. As from January 1st, 2019, the new Agirc-Arrco scheme has rolled out a contribution basis that is made up of 2 salary brackets. A separate contribution rate applies to each salary bracket and is shared between the employer (60%) and the employees (40%).

Basis Employee’s rate Employer’s rate Total Point calculation rate
Bracket 1: between 0 and 3,377  € (1 Social Security ceiling) 3.15% 4.72% 7.87% 6.2%
Bracket 2: between 3,377  e and 27,016 € (8 social security ceilings) 8.64% 12.95% 21.59% 17%

The adjusted (or effective) contribution rate is the contractual contribution rate (or point calculation rate) multiplied by an adjustment factor of 127 in 2019 (the adjustment factor was 125 up to the end of 2018). Points accrued by employees on the basis of paid contributions (employee’s share + employer’s share) are calculated using the contributions resulting from the application of the point calculation rate. The surplus calculations that result from the application of the adjustment factor are used to finance the Agirc-Arrco scheme.

Two or three additional contributions are withheld, depending on whether the employee has executive (“cadre”) status:

  • CEG: overall balance contribution, intended to compensate for expenditure resulting from retirement pension claims before age 67,
  • CET: technical balance contribution which applies to employees whose salary is greater than the social security ceiling,
  • Apec (Association for the employment of executive staff).

Please also see: table of social security contribution rates and ceilings.

2 – Accruing points

France’s supplementary retirement pension schemes are point-based. Points are determined by taking into account both those accrued through contributions and those awarded with no payment of contributions, i.e.:

  • 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.

Three factors are used to calculate retirement pension points: contribution basis, point calculation rate, and point purchase value.

Number of points = Contribution basis x Point accrual rate / Point purchase value

3 – Claiming a pension

Age

A supplementary retirement pension is awarded at the full rate to individuals:

  • who have reached the statutory age of 62 and have accrued the required number of quarters for entitlement to a full-rate basic retirement pension.
  • who have reached a minimum age of between 65 and 67, as determined by their date of birth, with no required length of employment.

A supplementary retirement pension can be awarded at the full rate before age 62 if the applicant has been awarded his/her basic retirement pension on the basis of a long career or on the basis of permanent inability to work.

Amount

On January 1st, 2019, the unified Agirc-Arrco scheme rolled out a temporary pension increase/ decrease system. It is intended as an incentive for members to keep working beyond the age at which they become eligible for a full-rate retirement pension.
This system only applies to members who were born on or after January 1st, 1957, and who become eligible for a full-rate Agirc-Arrco retirement pension after January 1st, 2019.

The 3 circumstances under which an increase/decrease applies are as follows:

  • The member applies for a supplementary retirement pension to start on the date they become eligible for the full rate under the basic scheme. A 3-year, 10% decrease will be applied to the amount of their supplementary retirement pension. The decrease will be lifted once the pensioner has reached aged 67 or more.
  • The member applies for a supplementary retirement pension to start one year after the date they became eligible for the full rate under the basic scheme: The decrease will not apply and they will be awarded the full amount of their supplementary retirement pension.
  • The member applies for a supplementary retirement pension 2 or more years after they became eligible for the full rate under the basic scheme: A 1-year pension increase of:
    • 10% will apply if you postpone claiming your supplementary retirement pension by two years,
    • 20% if you postpone your claim by three years,
    • 30% if you postpone your claim by four years.

The gross amount of the supplementary retirement pension is calculated as follows:

  • Gross yearly pension amount = Total number of points X point purchase value.
  • Until 2018, the AGIRC point purchase value was 0.4378 € while the ARRCO point purchase value was 1.2588 €.
  • As from 2019, there is a single purchase value for the AGIRC-ARRCO point. It amounts to the ARRCO point purchase value, i.e. 1.2588 €.

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.

4. Family-related top-ups

There are two types of child-related top-ups:

  • The dependent-child top-up
  • The top-up for having or raising children. Dependent-child increases cannot be paid on top of increases for having or raising children. Both parents can be awarded top-ups to their supplementary retirement pension.

To learn more: www.agirc-arrco.fr

5 – Reversion pension

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 if the employee’s or pensioner’s death occurred on or after January 1st, 2019.
  • If the death occurred prior to that date, the age requirements set forth by the former Agirc and Arrco schemes apply:
  • From age 55 for the Arrco reversion pension if the employee’s or pensioner’s death occurred on or after July 1st, 1996,
  • From age 60 for the Agirc reversion pension if the employee’s or pensioner’s death occurred on or after March 1st, 1994.  The eligibility age can be moved forward to 55. In this case, the amount of the Agirc reversion pension is lowered unless the claimant has been awarded a reversion pension from the basic scheme.  

Unlike under the basic scheme, this reversion pension is awarded with no means test.

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

Orphans

Under the Agirc-Arrco scheme, a child who has lost both parents can receive a reversion pension:

  • if they are under 21 years of age at the time of their remaining parent's death,
  • or if they are under 25 and a dependent 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.

An orphan can be awarded a pension on the basis of each parent’s entitlements.
If the remaining parent’s death occurred on or after January 1st, 2019, the orphans’ Agirc-Arrco reversion pension will amount to 50% of the entitlements accrued by one or both parents.

If the remaining parent’s death occurred prior to January 1st, 2019:

  • Orphans’ Arrco reversion pension: 50% of entitlements.
  • Orphans’ Agirc reversion pension: 30% of entitlements.

For more information.