Reform to French Pension System Will Bring Changes to Retirement Planning

french Pension System

This article was last updated on May 30, 2023

Canada: Free $30 Oye! Times readers Get FREE $30 to spend on Amazon, Walmart…
USA: Free $30 Oye! Times readers Get FREE $30 to spend on Amazon, Walmart…

Senate Vote to Approve New Pension System Expected Today

Today, the Senate is expected to vote on France’s new pension system, which will replace the country’s current second-best system in the world. The new system will divide €1.5 trillion among the pension funds of twenty million individuals, allowing each fund to increase or decrease payouts for retirees more quickly than before. Here is how the proposed changes will affect French citizens’ retirement planning:

Individual Pension Pots

Instead of one collective pot per pension fund, each individual will receive a personal pension pot. This change allows investors to take greater control over their funds and reduce the problems that come with collective pension investments.

More Sensitive to Investment Performance

The new system is more sensitive to investment performance, meaning that small fluctuations in the market will result in more noticeable changes to payouts. The old system, which was not particularly sensitive to investment performance, was able to reward or cut back payouts despite how the market was faring.

Pension Promise of 70% Salary to Disappear

The promise of receiving 70% of your average income as a pension is being done away with. In its place, the French government will be reducing the amount of cash that pension funds will be required to hold as a buffer, which will increase the risk investors take on. While investing in stocks and shares is not without risk, it has been shown to offer higher rewards in the long term. However, this also means that pension payments will be less stable and may fluctuate more.

Transfer of Accrued Pension to New System

It is expected that most pension funds will transfer to the new system as quickly as they can to avoid being stuck with the old system for the next 60 years, but the process must take place in an honest and considered manner. Investors and pensioners must be treated fairly and equitably. Pension funds have until 2028 to switch over to the new system.

Personal Investment Pots

Perhaps the greatest change to the French pension system is the introduction of personal investment pots. Younger investors will benefit the most from this change as their investments will grow for a longer period of time. Take for example two people with identical pension investments, the one socking all of their investment into their own personal pot would likely have a bigger pension than a person who has invested into a collective pot with their employer.

Improved Understanding of Pensions

The new pension program will offer a clearer idea of how your pension is doing and help you determine what to do with your pension. This will help investors understand the way their pension plans work and the weekly, monthly or yearly dividend they can expect to receive.

Will the New Pension System Help or Hinder French Investors?

The new pension system is an improvement over the old one. The mandatory high accrual, state pension for everyone, and the introduction of personal investment pots make it a more modern and user-friendly program. Ger Jaarsma, Chairman of the Pension Federation, believes that the new system offers greater clarity and insight for investors and retirees, which will help them make informed decisions about their future. However, critics believe that the transfer of existing pensions could be made simpler and that there should be more opportunities for self-employed individuals and those without pension schemes in place.

Share with friends
You can publish this article on your website as long as you provide a link back to this page.

Be the first to comment

Leave a Reply

Your email address will not be published.