- The strike of 5 December paralysed trains, metros and flights in France against the pension reform.
- The plan would replace the current forty-plus schemes with a single points-based system.
- The debate shows that public retirement provision is being reformed across Europe, including Spain.
On 5 December 2019, France experienced one of its widest strikes in years. Unions called an open-ended stoppage against President Emmanuel Macron’s plan to reform the pension system. The rail company SNCF announced that only one in ten commuter and high-speed trains would run, nine in ten TGVs were cancelled, eleven of the sixteen Paris metro lines were closed and about 20% of flights were cancelled.
The government’s plan aims to replace the more than forty existing pension schemes, with different rules for each group, with a single points-based system, in which each euro contributed gives the same rights. Unions fear the change will lower pensions or delay the effective retirement age, and the mobilisation is already compared with that of 1995, which paralysed the country for about three weeks. The French government had announced that it would unveil the details of the reform in the following days, so the stand-off with the unions promised to drag on.
What a points system is
In a points system, each worker accumulates points during their working life according to what they contribute, and at retirement they are converted into a pension according to the value of the point at that moment. It is presented as a simpler and fairer system, because it removes differences between groups. Its difficulty lies in defining who sets the value of the point, and how the purchasing power of the pension is protected when the population ages.
France has historic special schemes, such as those for railway or urban transport workers, with more favourable conditions. By removing them, the change affects rights that their beneficiaries regard as acquired. This explains the intensity of the protest: it is not just a technical discussion, but a question of fairness between generations and professions.
The Spanish mirror
Spain has a public pay-as-you-go system, in which the contributions of current workers finance the pensions of retirees, and has faced its own adjustments. The 2013 reform introduced a gradual rise in the ordinary retirement age to 67 by 2027, a sustainability factor and a revaluation index, although these last two mechanisms have since been suspended or replaced.
The debate on how to guarantee adequate pensions with an ageing population is common to all of Europe, and in Spain the Toledo Pact continues to seek consensus. For families, the practical consequence is that the public pension is the base of retirement income, but its future level depends on political decisions that cannot be taken as settled. In countries with pay-as-you-go systems, demographic change forces the parameters to be reviewed periodically, and it almost always generates tension between generations.
What to review
Anyone in the final stage of their working life should request a report of their employment record and an estimate of their pension from Social Security, and check that their contributions are complete. For the self-employed, the choice of contribution base directly affects the future pension.
With more time, consider how to supplement the public pension with personal savings, property or pension instruments, taking into account the horizon, liquidity, taxation and risk. There is no universal formula. Consult your adviser to plan according to your case and review the plan periodically.
The public pension is a base, but its future is decided at the ballot box and in parliaments.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
