Why the Golden Age of French Retirement is Ending

For decades, French retirees have enjoyed an enviable standard of living, departing the workforce as early as 62 and benefiting from one of the most generous state pension systems in Europe. This era, however, is drawing to a close, as economic pressures and shifting demographics threaten the sustainability of the country’s model.

The crisis deepened recently after a vote of no confidence forced Prime Minister François Bayrou to resign, leaving efforts to tackle France’s significant deficit in disarray. On the streets, nationwide strikes and protests have brought cities to a standstill, with workers expressing anger over budget cuts and controversial pension reforms.

Interest in the security of retirement has plummeted according to a recent study by Natixis IM, which showed France falling to 27th place in an index of 44 countries for retirement security. The slide is blamed on spiralling public debt, elevated unemployment and one of the highest tax burdens in the developed world. These issues have placed the nation’s public finances under strain, threatening the livelihoods of future pensioners.

France’s pension system operates on a pay it forward basis, where current workers fund the pensions of today’s retirees. The promise has historically been that workers will be rewarded with a long and comfortable retirement themselves. However, as France’s population ages—with one in five citizens now over 65—fewer workers support an increasing number of pensioners. The costs have ballooned, and taxpayer contributions are no longer enough, forcing the system into deficit. Today, pensions absorb a quarter of all government spending in France, compared to one fifth in the United Kingdom.

Despite these strains, French retirees have reaped generous benefits. Many drew pensions from the age of 60 in the past, while the minimum age is now 62. By comparison, the UK state pension age sits at 66. French pensions are automatically increased in line with inflation, and occupational schemes supplement retirement income, with a combined contribution rate reaching up to 21.6% of earnings—substantially higher than the UK’s minimum requirement of 8%. The outcome is a markedly higher replacement rate for French retirees, who receive around 72% of their pre-retirement earnings, according to the OECD, whereas British retirees receive just 54%.

This generous system comes with a hefty bill. France pays €400bn to pensioners annually, representing 14% of its GDP. In contrast, the UK spends about 5% of its GDP on state pensions. Economists warn the French system is facing a reckoning, as demographic changes mean today’s workers contribute more than ever, yet are likely to receive less than the generation that preceded them.

Sustainable reform is elusive. Proposals such as means-testing pension payouts or freezing increases have proven politically toxic, toppling governments and provoking widespread resistance. With the French state shouldering a debt load at 113% of GDP and a deficit expected to hit 6%, action is unavoidable. Any attempt to reduce pension costs will face fierce public opposition, but the days of early, comfortable retirement for all are rapidly vanishing in France.