Vive la differance – Britain and France’s approaches to state pension reform

This “réalité économique”, as the FT and Mike Harrison reminds us, is that the promise of shorter working lives is a false one.

In the real world economy of France we have two opposing views that have come to a head. As the FT report, hundreds of thousands of French people protested over the weekend and some protested violently

“It’s war in the 13th arrondissement tonight, because otherwise we will all be working until we’re 88,” said Paul, a construction contractor in his mid-50s who declined to give his last name.

Friends of mine , who live in France , confirm that the French population regard their right to stop work as absolute and they look to the State for funding.

So Macron’s move to put his Government at risk by forcing through the measures to increase the state pension age are all the more astounding.

Not since Thatcher in the late 1980s can I remember conviction politics so focused on a single issue. This from an earlier FT article.

“Macron does not take risks just for the sake of it, but he will do so out of determination to transform France,” said a person who has worked closely with him. “He genuinely thinks that people need to work longer given the ageing of the population and the state of public finances, so he is determined to finish this.”

Vive la differance

The French state pension differs from ours – and not just in the length and depth of payment.

The French state pension includes what we might have called Serps/S2P before 2016 and has aspects of what we would call an “occupational pension” about it. Albeit the state guarantees payments and this is funded on a PAYG basis, like unfunded public sector pensions.

The question for the French public is akin to the issues for Waspi women who challenged the fundamental right to change retirement expectations without proper consultation.  We have had fundamental recent changes to our pension system that have gone unchallenged

The closure of Serps/S2P and the creation of the single state pension created a large number of winners and losers. Even now, seven years on, most people do not know which they were.

Similarly, the de-linking of many pensions revaluation and payment increments from RPI to CPI has been carried out without industrial action, future accrual to many public sector schemes has shifted from final salary to career average. And this is before we start considering the wholesale collapse of DB accrual in the corporate sector

As well as the UK public having a different pension system, we seem to have a much lower understanding of how it works. This has allowed incremental change has been implemented with death by a thousand cuts to the pre 2000 consensus.

In the next few weeks, the UK Government is set to announce the results of its state pensions review.

In France, the issue is whether to push the state pension age up by two years to 64

In the UK we are considering putting the state pension age up by one year to 68

While they are rioting on the streets in Paris, the public debate around Lucy Neville-Rolfe’s review, is hardly deafening.

Vive la differance” is a happy and fun way to explain that men and women don’t go about things the same way. But it can be applied in any context to celebrate diversity.

Stating our national identity by managing our retirement affairs as we do, may give credit to us “roast beefs“.  I’m not above talking us up as a nation that thinks intelligently and carefully about our pension system.

There are good arguments for putting up our state pension age (falling fertility) and for keeping it where it is (lower expectations of mortality).

Other will argue that creating a pensions system so complicated that it can be manipulated at well is more Machiavelli than Beveridge.

Nonetheless, the idea that changes to our retirement age cannot be debated peaceably is a nonsense.  We should recognize the diversity of opinion and celebrate it, not go to war over it!

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , , , . Bookmark the permalink.

1 Response to Vive la differance – Britain and France’s approaches to state pension reform

  1. Allan Martin says:

    What about our H M Treasury Ponzi scheme?

    France may have pension problems but what about the UK’s index linked unfunded defined benefit (DB) pension promises? These deferred pay promises are for over 5m hugely deserving public sector employees. Our Whole of Government Accounts (2020) put this accrued unfunded liability at £2,100 bn. The “fund” is however the UK economy from which taxation will be levied in future and this prompts the above arithmetic challenge.

    The actuarial assumption underlying the schemes (NHS, Teachers etc) contributions, benefits and retirement age calculation is the SCAPE discount rate. I suggest it is the most unappreciated but important actuarial assumption in the country. SCAPE is currently set by reference to long term GDP growth of CPI+2.4%pa. Previous benefits were promised assuming real GDP growth of 3.5 – 2.8% pa. Is this reasonable and sustainable?

    GDP growth at such rates hasn’t been achieved since the 2008-09 financial crisis and we have of course had Brexit, C19 and the war in Ukraine affecting actual and prospective growth. I suggest a consequential and massive intergenerational transfer of liability to future taxpayers – you, your children and grandchildren (if they don’t emigrate).

    Rather than look at the State Pension “triple lock”, I suggest taxpayers, politicians and the media should consider this “lifetime pensions lock”. Hopefully the Chancellor will shortly announce some action in the long awaited H M Treasury consideration of SCAPE Methodology. I suggest that these pension debts are currently unsustainable.
    If attention catching headlines were required, I could also volunteer –

    • 11.5% public sector pay rise. (Pensions are deferred pay, with CPI+ increases)
    • The irresponsible OBR? (OBR Fiscal Risks don’t include this GDP shortfall.)
    • Liz Truss’s brave attempt to avoid long term financial ruin. (GDP of 2.5% pa sought)
    • Pension recession cost – only 5p on the basic rate of income tax. (= 2.5% x £2.1tn)
    • The partial Pension Regulator (TPR doesn’t regulate its own staff pensions funding)

    Your views and perhaps even some Parliamentary, OBR, HMT and media comment would aid appreciation of this other National Debt.

Leave a Reply