Are you considering retiring in France? It’s essential to understand the country’s state pension system. France’s comprehensive and generous pension system provides financial support to retired workers. However, navigating the system can be confusing, especially if you need to familiarize yourself with the language or rules.
France’s lifestyle, culture, and cuisine have always had a strong allure for working-age expats. Many are so captivated by the country that they eventually decide to retire there. However, retiring in France involves a range of factors to be considered. These include moving logistics, choosing a suitable location, and understanding the French pension system. Generally, you need to have worked for a specific period to be eligible for a French state pension. Moreover, transferring your existing pension plan from your home country to France may be possible.
The France Pension System
The French people are renowned for their appreciation of the good things in life, which they refer to as the “art of French living.” This extends to all stages of life, including retirement. Fortunately, several options are available to those planning to retire in France. The French pension system comprises three main components: the state pension, compulsory supplementary pension, and voluntary private pensions.
Savvy workers can maximize their pension savings by contributing to all three pillars. France has a substantial retired population, with almost 15 million residents receiving a state pension. The French government is planning a significant reform of the pension system, which includes gradually raising the retirement age and revising the minimum state pension amount. However, due to a general election scheduled for 2022, any changes will unlikely be implemented until at least 2023.
French State Pension
In France, social security contributions are mandatory for all workers and contribute towards the French state pension. It is worth noting that individuals must work for a minimum of 42 years (or 40 years if born before 1952) to qualify for the full French state pension. However, this requirement is set to increase to 43 years for those born in 1973 or later by 2035.
You can still claim a prorated French pension if you have worked and paid social security contributions in France for at least a decade. Under the scheme, retirees can receive 50% of their average annual earnings. Individuals born after 1953 are entitled to a minimum of 37.5% of their earnings.
Compulsory Supplementary Pension
In addition to the state pension, workers in France contribute to supplementary pensions managed by industry bodies. The two most recognized schemes are AGIRC (for executives) and ARRCO (for non-executives), which merged in 2003. Both employers and employees make contributions to these pensions on a pay-as-you-go basis. Pension funds calculate your rates based on the points accumulated throughout your career.
It is important to note that the amount of your supplementary pension is usually calculated based on the average salary earned during your entire working career rather than just the best 25 years as with the state pension.
Who is eligible for a Pension?
The minimum retirement age in France is 62 (or 60 for those born before 1 July 1951). However, the French authorities encourage individuals to continue working for longer and offer incentives to do so. For instance, those who work past retirement age for each quarter of a year receive an increase in their pension.
It is worth noting that individuals born after 1 January 1955 can only claim a full state pension once they reach the age of 67. Nonetheless, early retirement is possible under certain circumstances. Early retirement typically applies to individuals who have worked from a young age, those with disabilities, or those who have worked in unhealthy environments.
Those who fall into these categories may be able to retire up to two years earlier than the statutory retirement age. For instance, workers with disabilities may retire between the ages of 55 to 59. You can learn about the actual conditions on the French social security website.
Who can claim a Pension?
After working in France for a minimum of ten years, you can claim a French state pension. Alternatively, you can transfer some of your pensions from your home country, which can benefit ex-pats planning to retire in France.
What affects your Pension?
Several factors can influence the amount of your French pension. For instance, workers who earn low wages may receive up to 85% of the country’s minimum payment, approximately €636 per month. Moreover, there is a minimum income benefit for those who reach 65, but it is typically unavailable to workers who have had full careers.
It’s important to note that your French pension payment rate is based on your contributions, which means you won’t receive the total pension rate if you have not contributed for the full term. This also means that if you retire early, you may receive a decreased pension rate from age 55 or 57 (depending on your birth year).
Pension for ex-pats
If you have worked in other European countries but do not meet the requirements for a French pension, you may still be able to combine the total number of years worked to qualify for a French pension or get higher pension rates. However, the extent to which your periods of employment abroad are counted depends on the country you have previously worked in and whether it has a social security agreement with France.
The good news is that France has social security agreements with EU/EEA countries and Switzerland. This means that workers contributing to social security in these countries can count those years towards their French pension. The same may apply to workers who have contributed to social security in many non-EU countries.
Transfer and Consolidate your UK Pension
For UK ex-pats relocating to France, a Qualified Recognized Overseas Pension Scheme (QROPS) may be an option to consider for transferring their pensions. Consolidating your pensions into one plan through QROPS can simplify managing your retirement funds and mitigate currency fluctuations.
While QROPS offer several benefits, they may not be appropriate or accessible for all UK pensioners. Seeking guidance from a qualified financial advisor like AES can help determine whether this suits your retirement planning needs.
The Factors that affect the amount of French pension you will receive
- “salaire annuel moyen (SAM)” refers to the average annual earnings on which a person has paid social security contributions. In 2008, the calculation method for SAM was updated to consider the 25 highest-earning years rather than a simple flat average. This means your SAM will be based on the 25 years you earned the most during your working life.
- Your pension rate in France is determined by various factors, including the years you worked and the number of social security contributions you made. The maximum pension rate you can receive is 50% of your basic salary, while the minimum is 37.5% for those born after 1953. Your final pension rate is adjusted based on a percentage calculated from the number of conditions you meet. For instance, if you worked more or less than the required years, your pension rate will be adjusted by set percentage amounts.
- Various periods can contribute to your total period of insurance, which is used to determine your French pension eligibility. This includes periods during which you made social security contributions and other categories such as parental leave, industrial work, arduous work, and unemployment.
Tax on Pensions
Regarding income tax on pensions in France, it is calculated on a progressive scale. However, an annual tax-free allowance of 10% for expenses is capped at €3,912 per household in 2021. Tax is assessed on a household level rather than individuals to benefit couples where one spouse earns more than the other.
Additionally, France has signed agreements with several countries, including its European neighbors, which help people retiring to France avoid double taxation.
Supplementary Pensions in France
In France, there are two types of supplementary pensions available to workers. The first is the voluntary private pension, while the second is the voluntary occupational pension, also known as a “company savings plan.” The French government actively encourages both types of pension.
Workers can opt for a five-year or 10-year policy, with contributions as low as €50 per month. As with other pensions, there are limits on tax-free contributions from both workers and employers. Private voluntary pension contributions are tax-deductible, capped at 10% of the previous year’s earnings.
Employer-paid private pension plans, or company pensions, are also available but are generally for executive-level employees. Private pension plans can also be obtained through banks, pension funds, or insurance brokers.
Other pensions in France
Survivor pensions
Under certain circumstances, a surviving spouse, or even an ex-spouse, may receive more than half (54%) of the deceased spouse’s pension benefits. The surviving spouse must be at least 55 years old and have an income not exceeding €21,985.60 (for a single person living alone). While the basic state pension scheme does not provide for orphaned children, supplementary pension plans allow children to claim between 30% and 50% of the deceased’s pension, subject to varying terms and conditions depending on the plan. In some instances, those under 55 and on a low income may be eligible for a widowhood allowance, assessed by the French pension authority.
How to apply for a Pension
Upon reaching the legal retirement age in France, individuals must get in touch with the National Old-Age Insurance Fund (Caisse Nationale d’Assurance Vieillesse – CNAV) in order to claim their pension. The French pension authority provides a comprehensive guide on applying for an international French pension for those outside France.
Hope our blog on State Pension in France gave you a clear idea on how it works and who can claim it. To get best sri lanka exchange rate at low fees choose Teeparam Exchange. And we are also offering international courier service, air ticketing, travels and tours.