Podcast: the detail
The French really know how to protest – even if it may seem to us that they have got it right, with a retirement age of just 62. But that does not tell the whole story about the complexity of the French pension system. , and the stability of ours.
In the same week that hundreds of thousands of protesters in France took to the streets again in anger over the plan to raise the retirement age to 64, in New Zealand that our retirement age should go to 70 barely raised an eyebrow.
The message from French President Emmanuel Macron is that the country cannot afford to keep the retirement age at 62 and that something must be done to prevent a system collapse.
But polls show that seven in 10 French people oppose the plan, and what has put them further on the wrong foot is that Macron controversially used executive powers to raise the age without a vote in parliament.
That has led to hundreds of demonstrations across the country and strikes by workers, from garbage collectors to gas station workers.
Lyon-based New Zealand journalist Seamus Kearney says it’s all about work-life balance. “That’s really a sacred subject here in France.”
And while we may envy France for its 35-hour work week and early retirement age, all is not as it seems, says Kearney.
Kearney says France’s super plan is complicated and confusing with a range of payments to workers depending on their industry and what their union has negotiated. He says employees pay various mandatory payroll taxes that go toward pensions.
Among other things, it is unfair to women who are paid less on average than men and who receive their pension later than men.
Unions have challenged Macron’s new policies, saying it doesn’t go far enough to address the inequalities.
In addition, top economists have questioned Macron’s rationale.
“They’ve said, ‘Well actually, is it that urgent? Is it true that the pension system would collapse?’” says Kearney. And while it is true that France spends a lot on pensions compared to the OECD, the GDP rate is not much higher, and the numbers are expected to balance out in the coming years.
Kearney says the battle is far from over, but violent clashes between rioters and police are deterring many people from joining peaceful protests.
New Zealand pensions commissioner Jane Wrightson tells The Detail that the state pension schemes of the two countries cannot be compared.
“There is a terrible problem President Macron has. Their pension costs are almost 14 percent of GDP, which is very high. Ours is only 4, and we expect this to only increase to 6.4 by 2061,” she says. “So we are here on a completely different scale.
“The other thing to note is that the French are very dependent on state pensions. They have no private savings schemes.”
New Zealand’s universal pension, where everyone gets the same rate when they turn 65, isn’t perfect, Wrightson says, but there’s no need to raise it. (With the April 1 increase in benefits in New Zealand, a single retiree living alone will receive $496.37 after tax per week, a couple will receive $763.64 per week.)
National would gradually raise the super age to 67 if elected, citing people’s increasing longevity. Leader Christopher Luxon says it would happen gradually and people would have 15 to 20 years notice.
Wrightson says we don’t have to.
“It is sometimes said that everyone is aging internationally and that is not true,” she says. “About 70 percent of OECD countries now have a retirement age of 65 or less, and those who hang it – or talk about it – are only talking about raising it to 65 over the next four decades.”
Wrightson says our focus should be on improving the lives of Māori, Pasifika people and women, who reach retirement age who are less fortunate than other retirees – they are the people most hurt by an age reset, along with people with manual labor jobs whose body hurts in their mid-sixties.
“I get upset when I talk to younger people who say, ‘The pension won’t be there when I retire,’ says Wrightson. But of course it will be – it could be in a different form, it could be better or it could be worse.
But those young people should start thinking about how they want their lives to be when they retire.
Wrightson says people who want to learn more about managing their money and planning for the future can visit the independent website Sorted.org.nz.
Learn more about the economics of pension reform by listening to the full episode.
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