Article published in Les Echos on 9 February 2025
Baby boomers are the big winners in our pay-as-you-go system. They should bear much of the burden of fiscal consolidation, while making the system more redistributive within a generation, explains economist Frédéric Cherbonnier.
In order to tackle our public debt, support purchasing power and invest for the future, we need to raise the employment rate among older people. This will require tougher conditions for accessing retirement, in terms of both the legal retirement age and the conditions for early retirement. But in the current budgetary and political context, this is only possible by moving towards a fairer system.
The first angle of approach is intergenerational fairness, measured by analysing the gap between contributions paid and pensions received. According to the latest report by the Pensions Advisory Council (COR), those aged over 75 have benefited from an ‘internal rate of return’ of nearly 2%. This rate corresponds to the equivalent real return in a capitalisation system, i.e. the rate of return that an insurer would have used to capitalise contributions and convert them into a life annuity of an equivalent amount. For French people currently in work, this rate will be much lower, falling below 0.5% for those who are currently under 50! The result of slower economic growth and measures taken to cope with the ageing population includes the decoupling of pensions from wage growth and the extension of the contribution period...
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Illustration : Photo by Huy Phan on Unsplash
