Pensions in France

In France, pensions fall into five major divisions;

Non-contributory minimum pension
Mandatory state pension provision
Mandatory occupational pension provision
Voluntary private collective pension provision
Voluntary private individual pension provision.
Non-contributory minimum pension

This minimum pension is the first level of the first pillar of the French pension system. The ASPA is a monthly benefit paid to low-income seniors, whether or not they are former employees. It is not a retirement pension: it is financed by the State, not by social contributions. It is a "social minimum", like the RSA. Since January 1, 2006, it has replaced the multiple components of the minimum old-age pension or the "Minimum vieillesse" in french. This pension is paid by the CNAV, the Caisse Nationale d'Assurance Vieillesse, the French social security organization that manages the basic pension; or by the MSA, the agricultural social security, when the elderly person depends on the agricultural system. This minimum pension is targeted to ensure that individuals with low salary contributions during their working lives can receive a base level of pension. The mechanism for this is the minimum contributory pension, which ensures that retirees receive a minimum monthly pension if their basic pension is below a certain threshold. As of early 2024, the monthly ceiling for personal pensions required to qualify for the minimum contributive pension was revised to €1,367.51 following a rise in the SMIC. This adjustment ensures that the sum of the primary and supplementary pension does not exceed this ceiling, aligning retirees' total pensions to the new amount if they are entitled to the minimum contributive pension.

Conditions of attributions

There are several conditions for receiving this pension:

The recipient must be able to demonstrate that they regularly reside in France; if they are a foreign national, they must also fulfill additional requirements.
The beneficiary must be at least 65 years old.
Finally, the beneficiary must not exceed a certain level of resources. To evaluate this, all professional income, property income, retirement pensions, disability pensions and the AAH adult disability allowance must be taken into account. The ceiling not to be exceeded is re-evaluated every year. In 2022, this ceiling is set at 11,001.44 euros per year for a single person and 17,079.77 euros per year for a couple.
Amount of the allowance

The amount of the ASPA is calculated by taking into account the difference between the required resource ceiling and your income. In 2022, the maximum amount of the allowance is 11,001.44 euros per year for a single person and 17,079.77 euros per year for a couple. When a beneficiary receives other income, it is deducted from the ASPA.

Recovery of the allocated sums

The ASPA is not a simple allowance, it must be seen as an advance from the state: a recovery of the allocated sums can take place in the form of a levy on the eventual inheritance. The ASPA, therefore, has a redistributive character among recipients.

Minimum Old Age pension

The expression "minimum old-age pension" corresponds to a former allowance that no longer exists, but it is still used in everyday language to designate the ASPA
The minimum old-age pension was created in 1956 and replaces the old workers' allowance AVTS of 1942. The objective is close to that of the ASPA.
Unlike the ASPA, however, the minimum old-age pension is made up of different allowances. The conditions for obtaining this benefit are similar to those of the ASPA; in particular, since the law of May 1998, which eliminates all nationality requirements.
This allowance is divided into two levels:

The first-tier allowance guarantees the recipient a minimum income equivalent to the amount of the AVTS.
The second level allowance is a supplementary allowance.
Mandatory state pension provision

The mandatory state pension is an unfunded contributory pension based on the 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 25 highest earning years up to the Plafond de la sécurité sociale.
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 state pension in France operates on a pay-as-you-go basis, redistributing contributions from current workers to retirees. It aims to provide 50% of a retiree's income based on their 25 highest earning years, up to a set ceiling. The pension system is funded through social security contributions, which in 2013 consisted of a total rate of 15.15%—8.4% by employers and 6.75% by employees—up to a contribution ceiling of €37,032, with an additional 1.7% on salaries above this amount.
In 2024, the French mandatory state pension scheme will continue to be financed through employer and employee contributions to social security, which cover various aspects of social welfare, including pensions. The overall contribution for old-age insurance, crucial for funding the pension system, is 15.45% of salaries up to the social security ceiling. This total is split between employers, 8.55%, and employees, 6.90%. For earnings above this ceiling, the contribution rate for old-age insurance is lower, at 2.42%, with employers paying 2.02% and employees paying 0.40. In addition, there is a 0.3% employee-only contribution to the Solidarity Autonomy Fund, which supports autonomy for older people. The General Social Contribution, another significant payroll deduction, is split into deductible and non-deductible parts at rates of 6.8% and 2.4%, respectively, complemented by a 0.5% Contribution for the Repayment of Social Debt.

Mandatory occupational pension provision

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%
Elderly employee	Second tranche of income	8%	7.7%	4.76%
Employer	First tranche of income	4.5%	none	3%
Employer	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 and are maintained as a reserve fund. This reserve fund amounts to approximately €50 billion in 2010. Both Arrco and Agirc are state administered pensions but managed by a private provider. As such they may affect pensions in other countries. For example, pension payments from both Agirc and Arrco must be declared in New Zealand and are abated from the New Zealand "superannuation" provided by the New Zealand Government. They would also have to be declared in Australia, as income or an overseas pension, but would affect Australian super or pension entitlements.

Voluntary private provision

Collective plans

The collective retirement 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 retirement savings account plans were created in 2004. 10% of annual income may be invested tax-free in these individual funds.

Pensions Reserve Fund

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.
In recent updates, as of 2023, the Pensions Reserve Fund achieved a net performance of +9.68%, reflecting a solid recovery in stock markets and effective management amid fluctuating interest rates. This performance is part of the FRR's broader strategy to secure the financial sustainability of France's PAYG pension system, which has significantly evolved from its initial funding via state privatizations. The fund continues to adapt its investment approach, focusing on sustainable and responsible investments, aligning with its original purpose of bridging future pension shortfalls.