A pension system can be financed in two different ways:either by pay-as-you-go or by points. These financing methods, which both exist in France, operate on the basis of the immediate transfer of resources, from the active to the pensioners, but under different conditions.
The government has made the reform of pensions, and more specifically their method of financing, one of its major future projects and intends to create a single system with the same rules for everyone, i.e. "a universal pension system where one euro contributed gives the same rights, regardless of when it was paid, regardless of the status of the contributor".
Thus, a single point-based retirement system could emerge. What is it about ? What are the differences with the pay-as-you-go pension currently in force? What consequences for employees
In France, the current pension scheme is made up of a general scheme for private sector employees, a scheme for the civil service and special schemes (SNCF, RATP, EDF, national police, sailors, deputies, etc.). Despite these different components, these schemes are all based on the pay-as-you-go pension system based on the direct and immediate payment of retirement pensions, financed by the workers who contribute to old-age insurance. This system, put in place at the end of the Second World War by the ordinances of October 4 and 19, 1945 which created Social Security, is based on the principle of solidarity between generations.
The pay-as-you-go pension system is current today for basic and supplementary pension schemes. It is based on three main principles:
With the pay-as-you-go pension system, the amount of pensions is calculated on the basis of old salaries, the best 25 years for workers in the private sector, for example.
In a points-based pension system, the amount of the pension is calculated from the number of points acquired during a career, and no longer from the number of quarters contributed as with the pay-as-you-go pension system. These points depend on the income received by the insured. An employee can retire as soon as he feels he has obtained enough points, and if he has reached the legal retirement age.
These points have a "liquidation value" (in euros) valid for all assets and set by pension schemes. When the employee decides to retire, the number of points he has accumulated is multiplied by this liquidation value to calculate his gross annual retirement pension.
The point-based pension is already the system used in France by supplementary pension schemes for private sector employees (Agirc and Arrco), self-employed workers and even liberal professions.
People who are not working (unemployed, on sick or maternity leave, etc.), automatically obtain a certain number of retirement points.
To know: Do not confuse pension by points and pension by capitalization. With the latter, the assets save to constitute their only future retirement via financial investments, real estate and dedicated funds and recover the money thus invested either in the form of capital, or in the form of an annuity, at the time of their retirement. .
If the current plan to reform the financing of the pension system is more oriented towards a point-based pension, it would in fact be more of a so-called "optional" system, inspired by Swedish and Italian models. This system consists of creating a "virtual account" for each worker into which all of their contributions are paid throughout their career. At the time of retirement, this accumulated capital is transformed into a "conversion coefficient" which takes into account both the retirement age and the life expectancy of each generation at the time of retirement. . The annual retirement pension is calculated by dividing the capital amount of each asset by this conversion coefficient. With this system, the contribution period is not taken into account. Only the accumulated capital determines retirement pensions. It is very sensitive to the overall economic situation of the country.
This optional points system does not call into question either the compulsory character or the principle of distribution of the current pension system because the contributions of active workers continue to pay the pensions of retirees.
On the other hand, by individualizing the method of financing pensions, this system facilitates the transition of workers from one status to another (private sector employee, self-employed or civil servant) during their professional career and makes it possible to no longer be penalized in the event of periods of inactivity, since the contribution period is no longer the essential element. On the other hand, this system unifies and simplifies the calculations and amounts of pensions between the different statuses of assets.
With a point-based pension system, however, the amount of his future pension is not guaranteed as is the case with pay-as-you-go pensions. It varies according to the value of the point and the conversion coefficient.
On the other hand, retirement by points taking into account the retirement age to define the level of retirement pensions (the later the worker leaves, the higher the pension), it should encourage later retirements in time or assets that started working early.
