France plans to raise its state pension age from 62 to 64 by 2030 – and in the UK our state pension age has long been expected to rise to 67 in 2027. In a recent article in La Tribune, Professor Les Mayhew compares the politics involved in both countries and the realities of linking the state pension age to the average longevity of the population. This blog is largely a translation of this article published on 11 January 2023.

Seen from a distance, the pension system in France does not differ significantly from that of the United Kingdom. There are essentially three levels of contributions: a public pay-as-you-go system in which pensions are financed by taxes, work-related occupational pensions and private pensions. Workers can contribute at all three levels. However, this hides both structural and systemic differences as well as cultural differences.

In the UK, the state pension age has been steadily increasing. It is 66 currently and will rise to 67 in 2027 and there are plans to raise it to 68. In France, it is currently only 62 years old (64 from 2030), and it is the lowest in Europe. In France, the retirement age is a much more sensitive topic, which explains the huge opposition to President Macron’s pension reforms. However, this begs the question why things are so much more difficult in France?

France and Great Britain have quite similar demographic structures. Both countries have a population of around 67 million, although with 13.7 million people aged over 65, France is slightly older than the UK, which has just 12.5 million over 65s. If retirement age is taken into account, the differences are more marked. In the UK there are 3.3 adults of working age for every person aged 66 and over, but in France there are only 2.2 based on retirement aged 62 years (assuming the age of entry into the labour market at 20 years).

Although there are many technical differences in pension rules, a key difference is that the state pension in France is on average around 50% higher than the basic British State Pension value. On the other hand, 30 years of contribution are enough to benefit from a full pension in the UK, against 43 years in France. This obviously has a big effect on retirement decisions and income sufficiency in retirement.

However, this comparison is a simplistic one, as it does not take into account the value of occupational and private pensions, which are of higher value in the UK and are also independently managed. For example, you can collect your occupational or private pension from a fairly early age, depending on the scheme, but at actuarially reduced rates. Tax incentives in the UK are also a great encouragement to save especially for higher earners.

The French pension system being more centralized than that of the United Kingdom, it is undoubtedly more subject to disputes. In the UK, strikes over pensions tend to be limited to specific professions, such as railway workers or university professors and are often associated with wage demands. This means that raising the state pension age in the UK has been relatively uncontroversial – at least until now. However, new changes are brewing across the UK side of the Channel.

Since the cost of pensions is determined by the number and age of the elderly, the United Kingdom is interested in the possibility of linking the retirement age to longevity, which France could also consider. An example would be to link the retirement age so that a person spends on average a third of their adult life in the retirement years and two-thirds in work. There are also other possibilities like linking pension age to life expectancy so that the period in payment is a constant.

A five-year review of the state pension age in the UK will be reported in 2023. The issues it examines are summarized in an independent report titled: “‘Not if but when’ the demographic and fiscal case for increases in state pension age”, published by ILC-UK in association with Bayes Business School. As in France, the momentum is for further increases in the retirement age, but it is clear that the task in France is more politically complicated than in the UK.

Notes

This blog is a translation of an article written in French for La Tribune. Where the article refers to “retirement age” read “state pension age” which, in the UK, is the earliest age you can start receiving your State Pension. You can keep working after you reach State Pension age. ‘Default retirement age’ (a forced retirement age of 65) no longer exists.

In the UK the State Pension age is under review and may change in the future.

In the UK, you usually need a total of 30 qualifying years of National Insurance contributions or credits to get the full basic State Pension. The basic State Pension: Eligibility – GOV.UK (www.gov.uk)

On 6 April 2016 the UK Government introduced different rules The new State Pension: Eligibility – GOV.UK (www.gov.uk) which means that people paying NI contributions after that date might not qualify for a full state pension until they have a total of 35 qualifying years of NI contributions.