Reforming the French pension system : the main challenges

The pension reform announced by Mr Emmanuel Macron during the French presidential election campaign was based on certain general principles, often summed up by the commitment that "each euro contributed gives the same entitlements". Since the details of the reform are not yet known, this policy brief aims to contribute to the public debate by presenting the basic principles of a pay-as-you-go system that, regardless of which target system is selected, is well conceived, and to emphasise the points where choices and trade-offs need to be made by the democratic debate. We thus highlight the advantages of revaluating pension entitlements with wage growth, and of setting transparent rules for changing pension formulas according to how the demographic conditions of the country change. The choices to be made are, however, major ones: what overall contribution rate should be chosen? What convergence should be established between the contribution rates of the various pension schemes? How fast should we transition to the new system? How can the solidarity mechanisms be improved? Or indeed what governance should be put in place?