Europe's pension systems: How do they compare with France?

President Emmanuel Macron has pushed through a plan to raise the retirement age in France from 62 to 64, sparking protests and strikes across the country.

But in a number of other European countries, where people must work to an older age before being eligible to receive a pension, observers have been shaking their heads at the vehemence of the French demonstrators. In Germany, for example, the pensionable age is set to climb gradually to 67, starting from 2024.

"It is always hard to compare pension systems because they are all very complex and very different. But this comparison is skewed," said Ulrich Becker from the Max Planck Institute for Social Law and Social Policy, which compares pension schemes from around the world with its "Pension Maps."

That's because the rise that has brought so many out to protest in France is actually an increase in the earliest age at which paid workers can retire without deductions from their pensions. Previously, they had to work for 41.5 years. After the reforms come into force, that is set to rise to 43 years. 

In Germany, a person can retire from the age of 63 — but only if he or she has already contributed to pension funds for 45 years. These conditions are further complicated by other factors, such as year of birth. 

In France, a full pension that does not depend on time spent working is paid out only after a person has reached the age of 67, and this will remain the case even after the reform.

Compared with the rest of the world — not just with Germany — French retirees have had it rather good up until now, at least with regard to the following three aspects: the pension rate, the pensionable age and the duration of pension payments (or life expectancy, which is counted from when a person first begins receiving a pension until death).

Many in France don't work until retirement age

Whether you can maintain your standard of living during retirement depends on what's known as the net pension replacement rate. That's the percentage of money that remains of the after-tax income you earned on average over your working life. In France in 2020, this was 74.4%. That means: If you received €2,500 (about $2,700) a month on average, for example, then you would receive about €1,860 ($2,002) as your pension.

In France, the net pension replacement rate is 14 percentage points above the OECD average. In Germany, pensioners receive just 52.9% of their after-tax earnings, calculated across their working lives. Taking the example above, that is about €540 less than in France.

The net pension replacement rate could now fall for many people in France. Not only is the minimum retirement age being raised, but also the number of paid working years one needs to receive a full pension before reaching the age of 67. This change would mainly affect low-income earners, because they mostly start working earlier. A person who does not start paying pension contributions until the age of 25 because she or he has studied would turn 67 after just 42 years of work, and would in any case receive the full pension.

To compensate for this, the French pension reform will raise the minimum pension to about €1,200 for single people. At present, the minimum pension is €961.08, putting it mid-table compared with other OECD countries. Incidentally, Germany is one of the few countries not to have a minimum pension. People with very low pensions can, however, apply to have them topped up.

In fact, however, many people in France don't manage to work until retirement age. As is the case in other countries, they accept pension deductions in order to give up their jobs at an earlier age. Often, however, this also happens involuntarily because older employees are forced into early retirement or even dismissed from their jobs. The chances of finding a new job at that stage in life aren't high.

In France, this means that men retire on average at the age of 60.4, and women at 60.9 — almost 3.5 years and 1.5 years earlier, respectively, than their peers in other OECD countries. However, this doesn't mean they'll draw their pensions earlier.*

Many receive unemployment benefits in the years leading up to retirement, and no longer pay into pension funds. At the same time, however, life expectancy in France is particularly high. Only in Luxembourg do men draw their pensions slightly longer on average (24 years) than in France (23.5 years). When it comes to French women (27.1 years), only Greek (28.4) and Spanish (27.7) women draw retirement benefits longer.

Securing future pensions increasingly difficult

This is one of the reasons the French government has found it necessary to reform the pension system, said Becker from the Max Planck Institute. "France — like all OECD countries, and others as well — must ask itself how it is going to adapt its pension system to the demographic changes," he told DW.

Longer life expectancies have become a problem for pension funds, because pensions will have to be paid out for a longer period of time, despite the fact that nothing more is being paid into those funds. This has coincided with falling birth rates, which means there are fewer wage earners to pay the contributions for increasing numbers of pensioners.

No pension system within the OECD can manage with just the contributions from those within it.

In Germany, for example, retirees can claim pension payments for the time spent at school or university, or when raising children, and these are taken from the federal budget and not from pension contributions. But many pension funds still post losses that must be compensated by tax revenue. The more generous pensions are, and the less favorable the demographic situation is, the bigger those subsidies tend to be.

In France, public pension subsidies are among the highest in the OECD, when measured against the gross domestic product. Only Italy has higher subsidies. This was what French Prime Minister Elisabeth Borne was talking about when she declared: "With this project, we make a pledge to balance out pension funds financially by 2030."

Retirement ages set to rise

"An obvious and widely discussed remedy is to raise the retirement age," said Becker. "This way, people pay in for longer and receive benefits for a shorter time. The idea is to redress the relationship between contributions and benefits."

This is exactly what a number of OECD countries have already done. In the Netherlands, for example, the retirement age is set to increase to 67 years and three months by 2028.

"Based on legislated measures, the normal retirement age will increase by about two years in the OECD on average by the mid‑2060s," the organization itself reported in 2021. "The future normal retirement age is 69 years or more in Denmark, Estonia, Italy and the Netherlands."

In Germany, no government has dared to seriously tackle a further increase since the 2006 decision to raise the retirement age to 67 by the year 2031. 

And in France? "People have lost sight of the fact that the reforms were also supposed to abolish privileges of certain groups, albeit in a rather arbitrary way," said Becker. "Obviously the reason for this is that the defense of social rights is considered more important than their generation-appropriate distribution."

This article was first published in German.

*Update, April 24, 2023: This article was originally published on March 26, 2023, and has now been revised in several places to distinguish between the age at the end of working life and retirement.