Valérie Batigne, President of Sapiendo-Retraite, Gerep’s partner for pension simulations, takes a look at the merging of the Agirc and Arrco second pillar retirement schemes which will take place on 1 January 2019. While some measures have attracted much comment, other lesser-known proposals deserve a closer look.
There are some fears out there, so can you tell us if wage earners will lose out when Agirc and Arrco points are converted?
Valérie Batigne – the answer is definitely no! The formula for converting the old Arrco and Agirc points into the new Arrco-Agirc points is completely neutral. This means that the value in Euros of vested rights will not change with the conversion. A wage earner who has accumulated 1,000 Agirc points before the merger will possess 347.8 new Agirc-Arrco points after the merger. The pension generated by his/her stock of new points will be exactly the same i.e. €435.20 per annum. In view of the complexity of a conversion rate with 8 decimal places, some suspicious minds had been expressing doubts on this issue. They were wrong…
However, you do point your finger at a contribution increase that has not received much comment in the economic press…
VB – Yes, indeed. Tranche 2 will be particularly affected. This increase is the result of three factors. Firstly, the Agirc-Arrco contribution rate on tranche 2 income will rise from 16.44% to 17%. At least this increase will bring extra points, which is not the case with the rest. The effective contribution rate will rise from 125% to 127%. That is to say that to obtain pension rights attaching to 100 you will need to contribute 127. The supplementary adjustment contribution of 2.2%, known as AGFF, changes its name and becomes the CEG but at a rate of 2.7%, an increase of 0.5%. All in all, therefore, tranche 2 income will be hit with an increase of 1.54%. However, the increase on tranche 1 income of 0.27% is likely to go unnoticed.
What do you think of the bonus / malus (penalty) system to be put in place as of 1 January?
VB – This system was announced as early as 2015 and is designed to push people into postponing retirement. Remember, this will only concern wage earners born after 1957 and who have contributed a sufficient number of quarters to be able to retire on “full pension” – if you can still call it “full pension” – since the act of applying to retire at full pension will trigger a reduction of 10% on second pillar pension for 3 years. This reform sort of adds a second full pension retirement age! At a time when everyone is touting simplification, this reform rather complicates things further. In addition, I would strongly recommend people who take retirement with such a reduction to make sure, three years later, that the penalty has been removed. This reform brings an additional IT problem and so everyone should bear in mind, there is a risk that IT systems might bug.
Valérie Batigne, president of Sapiendo-retraite