the essential
The Pension Orientation Council has published its new forecasts on the future of the French system.
The annual report of the Pension Orientation Council (COR), published Thursday, is part of a particularly uncertain environment regarding the economic and demographic outlook. These uncertainties are both cyclical and structural, linked to variables such as productivity, demographics, employment, wages and prices. Phenomena such as the slowdown in productivity, the effects of global warming, progress in artificial intelligence, and the decline in the birth rate complicate the development of medium and long-term economic and financial projections.
HORN
Financial projections show that the pension system balance, in surplus in 2023 (+0.1% of GDP), would be in deficit from 2024 (-0.2% of GDP). This deficit would widen to represent a financing need of 0.8% of GDP in 2070. This is partly due to the increases in pensions and a faster reduction in resources than in expenditure. The standard of living of retirees would increase less than that of workers. Compared to that of the entire population, the standard of living of retirees would be 83% in 2070 compared to 98.7% in 2021.
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The analysis of resources is delicate due to the various sources of financing, notably contributions from assets, earmarked taxes and State contributions for certain special schemes. Pension spending represents 13.4% of GDP in 2023, a high level in international comparison; this share would decline slightly by 2070. In 2023, the resources of the retirement system amounted to 13.6% of GDP. This share is expected to decline rapidly in the future, reaching 13.3% of GDP in 2030 and reaching 12.4% in 2070. In 2023, of the 384 billion euros in resources, only 257 billion come from contributions.
Sensitivity to demographic and economic developments
After recording surpluses from 2021 to 2023, the pension system would remain in deficit for the long term. The balance of the pension system was in surplus in 2023 of +3.8 billion euros, or 0.1% of GDP.
The balance of the pension system would deteriorate from 2024 (-€5.8 billion), under the effect of pension increases. This deterioration would continue over the entire projection period to reach – 0.4% of GDP in 2030 and – 0.8% of GDP in 2070.
Financial projections are very sensitive to demographic and economic developments. Therefore, the report devotes a significant part to analyzing the sensitivity of the projections to various assumptions, including fertility, life expectancy and net migration. For example, a variation in fertility or net migration can significantly affect the balance of the pension system.
