This minimum pension is the first level of the first pillar of the French pension system. It is a non-contributory pension introduced in 1956. It is targeted at people between 60 and 65 years old who have not been in paid work either for health reasons or because they were carers. It is available to both French and foreign citizens residing in France legally. In order to qualify a single person must have less than €7,635 and €13,374 for a couple. In 2010 the annual pension amounts to €8,507 for a single person and €13,890 for a couple. Amounts paid can be recovered by the state at the death of the beneficiary if the inheritance left is over €39,000.
Mandatory state pension provision
The mandatory state pension is an unfunded contributory pension based on redistribution of contributions from those working to those in retirement. The scheme aims to provide up to a maximum of 50% of the retiree's income during their highest earning years up to a limit of €35,000 annually. The state scheme is financed by a payroll tax known as "social security contributions". The rate in 2013 is 15.15% of pay up to the social security contribution ceiling of € 37,032, and 1.7% on the remainder of the salary. Management of the scheme is the responsibility of the Caisse Nationale d'Assurance Vieillesse.
The mandatory occupational pension is a defined contribution scheme that is mainly based on redistribution, but also has elements of investment. The aim of the schemes is to supplement the state pension increasing income of retirees from the 50% level to between 70% and 80%. There are several schemes, the main ones being: – Arrco – Agirc – Ircantec One third of this contribution is paid by the employee and the other two thirds by the employer.
Contributor
Income levied
Agirc
Arrco
Ircantec
Elderly employee
First tranche of income
3%
none
1.5%
Second tranche of income
8%
7,7%
4.76%
Employer
First tranche of income
4.5%
none
3%
Second tranche of income
12%
12.6%
9.24%
First Tranche is up to €35,000 in 2011
The schemes pay out based on a points system. The schemes are managed so that they are non-loss making. Surpluses are invested in the financial markets and are maintained as a reserve fund. This reserve fund amounts to approximately €50 billion in 2010.
Voluntary private provision
Collective plans
The collectiveretirement savings plans were introduced by François Fillon in 2006. They are company plans that enable employees to get tax credits when they contribute to these funds. Employee contributions are strictly regulated. The following is a list of the sources of funds that may be used to contribute tax-free to these funds:
Bonuses
Profit sharing
Voluntary payments up to 25% of total gross earnings
Company contributions up to 16% of the social security limit
Transfers from other company savings schemes
All the contributions are not considered as income for income tax purposes. At retirement the capital is not taxable, however the annuities are taxable as income.
Individual plans
The popular retirement plans were created in 2004. 10% of annual income may be invested tax-free in these individual funds.
The Pensions Reserve Fund was set up in July 2001 with the aim of using funds from privatisations of state holdings to finance the future shortfall of the state PAYG system. The target was to create a fund totaling €150 billion by 2020. As of September 2010, the total funds managed by the fund amounted to €35.7 billion.
