Économie et Statistique n° 441-442 : Pension systems and their reforms; assessments and projections
Career Hazards and Retirement Pensions
The French pension system creates a close link between working career and retirement, as retirement benefits are determined by the combined length of employment spells. Moreover, the parameters for calculating pensions are defined with reference to a continuous working career. In particular, between 2008 and the 2010 reform, full benefits were granted to persons with a total contribution length of at least forty years. Any deviation from this reference career may thus alter the benefits awarded to the retiree. The old-age insurance system, however, does include certain “solidarity” provisions, including eligibility for pension rights not offset by contributions to cover breaks in working careers due to illness, unemployment, or child-raising. The analysis of working careers of persons born between 1938 and 1948, using the retrospective calendars of the INSEE Personal Assets Survey (Enquête Patrimoine), shows the increasing share of unemployment spells, part-time-employment spells, and inactivity spells in successive cohorts. By studying typical cases of careers comprising such hazards, we can determine the extent to which the French pension system adjusts for these deviations from the standard continuous full-time working career. The “non-contribution” (i.e., pension credit) rules mitigate the impact of hazards on pension benefits irrespective of the person's earnings profile. However, there is a difference in the negative effect on the pension paid under the statutory system (régime de base) and on supplementary-benefit plans (régimes complémentaires). On balance, child-raising benefits curtail the impact of inactivity spells on pensions. By contrast, part-time-employment spells can decrease pensions, notably on account of the loss of accrued supplementary benefits. This is especially the case for management-level workers. The incidence of unemployment on pensions is all the greater if it occurs in a high-earnings period, typically at the end of a career.