2023-05-12 12:00:00
TRIBUNE/ANALYSIS – “THE” solution existed to satisfy everyone and balance the books without putting anyone on the street. While in 2012-2013 we wanted to impose 67 years on the liberal professions for full-rate retirement, on July 18, 2013, I thought went to the Ministry of Social Affairs, office 3C in charge of pensions, to explain that another way was possible.
Then President of the “Autonomous” Pension Fund for Doctors of France (CARMF, 200,000 members), I went to present an alternative to the extension of the contribution period that I had worked out, based on the free choice of the departure date.
I had demonstrated that we obtained the same balance as with a reform bringing the full rate to 67 years. I also added that this reform could be applied to all plans, and that “this would avoid putting everyone on the street again at the next reform”. The actuaries (retired statisticians) from the department were present, they had checked my projections and confirmed that there was no error. This reform will be blocked for 4 years, the decree will come out in December 2016, and since then, IT WORKS.
“The good reform is you who have it”. In Paris, everyone knows it exists, knows it works, but they don’t want it. For what ?
This solution, they all know it. The person I saw in 2013 piloted the pension reform for Jean-Paul Delevoye. His hierarchical superior, with whom I had made the appointment in 2013 and who will block my reform until the day before his departure, was the director of Social Security, Thomas Fatome, who in 2017 became deputy director of the cabinet of Édouard Philippe, also piloted the first failed Macron reform.
In October 2022, during a symposium, the President of the Pensions Orientation Council (COR) slipped aside to my successor at the Caisse de Retraite des Médecins: “The good reform is you who have it”. In Paris, everyone knows it exists, knows it works, but they don’t want it. For what ? We are in an administered society, with administrators who want to plan everything, to control your choices, whatever they may be. They hate freedom, incompatible with their ambitions. If you decide yourselves, they lose part of the divine power that they have attributed to themselves. Freedom is not part of the vocabulary of the ENA, because it cannot be planned.
History of the à la carte reform
In 2012, there was strong pressure from the authorities for the liberal professions to raise the age of the full rate from 65 to 67, most of them rushed to do so. When I asked my colleague president of dentists why he did it, he replied “because it suits me”. Maybe it suited his accounts, I’m not sure it suited his affiliates.
So I looked for another way than that of the eternal lengthening of the contribution period, starting from scratch. The full rate for doctors and liberal professions was obtained at 65, but you could leave between 60 and 65 with a penalty of 5% per year. Thus, if you liquidated at age 60, your pension was reduced by 25%. On the other hand, leaving after age 65, it was always the same amount, you were not rewarded, despite more contributions and a shorter retirement. The government increased these limits in the basic scheme from 65 (60 with a discount) to 67 (62 with a discount), and urged us to do the same in our supplementary schemes.
Advantages: no more compulsory starting age, free from 62 years old. Definitive à la carte retreat, no need to touch it up anymore. The good points replace the stick (…).
I wondered what it could give by bringing the full rate from 65 (or 67) to 62, at the existing “tariff” reduced, and that we improve each year more, to fall back on our feet at 65 or 67 years old. As a result, the projections gave the same balances over the long term (20 to 30 years, which we always project) as going to 67 years with the old system.
I therefore proposed a full-rate departure at age 62 (to align with the imposed basic scheme, otherwise 60 was possible), with retirement identical to the old one, taking into account the 15% discount. Each additional year worked gave a pension increased by 5% per year until age 65, then 3% per year until age 70. It should be noted that to these 5% are added the points acquired by contributions, ie approximately 8% increase in total per year, 25% for 3 years.
Advantages: no more compulsory starting age, free from 62 years old. Definitive à la carte retreat, no need to touch it up anymore. The good points replace the stick: no more penalties when you want to stop earlier (for health reasons among others), replaced by financial rewards for those who work longer. Individual decisions to leave earlier or later do not entail any cost for the person concerned, nor for the scheme, ie the other affiliates. Explanations.
The extension of the contribution period
Why for decades, each reform concerns only the lengthening of the contribution period to have the full rate, without ever structural reforms? Because it’s an easy solution that pays for the plan, without touching the contribution or the pension.
Demonstration with rounded single digits:
I work 40 years, and I live in retirement for 20 years (average for the population). If I am forced to do 1 more year, I contribute 41 years, i.e. + 2.5% of income for the scheme (1/40), and I will live in retirement for 19 years instead of 20, i.e. 5% (1/20) less expenses for the plan. In total, the plan earns 2.5% in revenue and 5% in monthly expenses, i.e. a total of 7.5%, without increasing the contribution and with equal retirement.
Thus the principle of the reform among doctors gives this: if you shorten your retirement period by 1 year out of 20 (5% in duration), I give you 5% more so that in total you receive the same total sum, and if, conversely, you extend your retirement period by leaving earlier, I reduce the annual amount, a little less but longer, so that in total, you always receive the same amount. This coefficient of 5% over 20 years is qualified as actuarially neutral (adverb which refers to the way an actuary proceeds in his work. It is a question of evaluating and managing the financial risks, calculated to cost nothing either to the regime or to the person concerned, editor’s note).
Here for the principle, the reality is not very far, because in practice the true coefficient of neutrality is not very far from these 5%. Some countries like Sweden calculate retirement based on life expectancy at the start, which is somewhat the same principle.
A point system
To switch to this à la carte system, you have to abandon the annuities and switch to a points system, where each euro contributed gives a certain number of points.
The unions are not in favor of it, because the current system makes it possible to hide all the inequalities, whereas a points system is a system which applies the principle that I have always defended in the management of the fund: “with equal income, equal contribution, and with equal contribution, equal pension”.
Moreover it is the transparency total, each of my affiliates can calculate their future retirement on a day-to-day basis according to their chosen departure date, knowing their portfolio of points and the value of the point.
This system is very easy to set up, and instantly, by transforming acquired rights into points. I did it in 2005 for the basic scheme for the liberal professions. We were not in annuities but in quarters, and during yet another reform proposal, I demonstrated the advantages of this system. While some liberal professions received for the same contribution 4 times more than others, today everyone is at the same level. This system does not prevent solidarity, I had established 2 tranches of contributions, above the Social Security ceiling, the points are bought more expensively.
A painful job must be remunerated at the height of the difficulty when it is exercised, not when retired.
With the current system, we do not see that certain professions, such as civil servants (and there is worse), receive 4 times more than employees with equal contributions, which means that the latter pay twice for retirement: a first once for their own retirement which their contributions finance in full, and a second time to pay the retirement of the first, financed by taxes and duties. In a point system, everyone is equal.
A pay-per-view and point-based system can solve a lot of problems. Take, for example, hardship. It is not up to retirement to finance it, especially since it is based on promises that will not be kept when the person starting today retires. A painful job must be remunerated at the height of the difficulty when it is exercised, not when retired. Who says better remuneration says possibility of leaving earlier having acquired more points, or of leaving later with a better retirement, with the choice of the interested party.
Freedom, Equality fraternity
You will have understood that the current system is totally contrary to the motto of France. There are only constraints, inequalities and no support between different categories, whereas an à la carte and points-based retirement system is Liberty, Equality and Fraternity, and… no one in the street.
The foundations of the current system have never been called into question regardless of the successive governments over the past 80 years, while the world has evolved. Our social system was instituted by the famous Ordinances of October 4 and 19, 1945. Ordinances are Laws enacted by the government without discussion in Parliament. Neither the Fourth nor the Fifth Republic have since opened a democratic debate on social protection. The only modifications that have been made to the system do not affect its fundamental bases. Subsequent governments have bypassed parliamentary debate, whether with the Ordinances of 1967, the Juppé Ordinances of 1996, and in 2023 49.3 and 47.1.
Past, current and future reforms do not solve any fundamental problem. They create, knowing that beyond the accounting aspect, there are women and men. To extend the duration of contributions is to eliminate the retirement of those who are less blessed by nature. Some are born with disabilities, others are more fragile and develop conditions (cardiac, cancer, obesity, etc.) which means that their life expectancy is not the same. The latter will contribute all their life for a retirement that they will not have, and it is to have the retirement of the healthy people financed by the less healthy.
When personal interests take precedence over the general interest, there is no more democracy, room for administrative dictatorship.
There are people who are born with certain disabilities, others who are more fragile and develop conditions that make their life expectancy not the same. You have cardiac patients, diabetics, obese, cancer patients, etc., whose life expectancy is more limited.
For everyone, there are also two phases in retirement: the first, where you can still fully enjoy life, do all the things you were unable to do when you were active, and a second phase, where one begins to be physically and intellectually diminished, a phase where one can speak less of “enjoying” retirement. Raising the starting age eliminates part of the first phase, the best one, whereas the increase in life expectancy, which is put forward to justify this raising of the starting age, only concerns the second phase.
Increasingly high costs, increasingly restrictive constraints, all this for less and less retirement, is the result of managed management. This balance sheet, we see it in all areas, since the country is run by administrators, and no longer by citizens, who are neither listened to nor heard. As for elected officials, France has changed a lot since politics became a profession, and is no longer a disinterested vocation. When personal interests take precedence over the general interest, there is no more democracy, room for administrative dictatorship.
- Gérard Maudrux is a doctor, retired surgeon, former president of the Autonomous Pension Fund for Doctors of France (CARMF).
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