Europe

The Telegraph has a point here, our pension system as it stands is completely unsustainable, as are many other pension schemes around the world.

For the UK, when state pension started, there were 10 workers to every pensioner, now there are 4, and that number is going to get worse.

However, the Telegraph would also be the first to get their knives out if someone were to float the idea of pensions reform.

E: The Telegraph wants to gut public sector private pensions, but keep the "triple-lock" state pension (i.e. state pension always goes up by inflation, average yearly wage increase, or 2.5%, whichever is highest) as it is. Nevermind where I said they have a point. They're being crazy as usual.

These are lies. It's literally disinformation. The president of the organisation whose job is litteraly to assess how sustainable retirement funding is explained that the government estimates for their reform was the worst possible scenario first, and second it was demonstrated that there are many other solutions to fund retirement plans in France than shitting on the new generations.

One parameter of this disaster in France is that a good part or the missing funding comes from the government refusing to increase public workers salary, or to pay them with primes that are not taxed, and thus don't fund retirement, or to decrease the number of public agents.

Another parameter is that the system is not under any risk on the long term. Only the next 10 to 15 years are planned to be difficult.

I can understand that liberal assholes want to enslave workers as long as they can possibly get away with, but spreading lies when the truth is that the government is litteraly sabotaging the system for it to happen is akin to what dictatorships do.

Emmanuel Macron’s humiliation at the ballot box last month could spell the end of his flagship pension reforms.

France’s parliamentary elections saw the rise of the far-Left and far-Right, both hostile to the President’s highly controversial policy to raise the minimum legal age of retirement from 62 to 64 by 2030.

Citizens will also need to work for 43 years – up from 42 today – to receive a full state pension.

Mr Macron believes the reforms are essential to save the public pension system as France’s population ages. The country is now home to 17 million pensioners, four million more than in 2004.

But the policy has been met with fury from French voters who are adamant they should not have to work longer. France’s state pension age is low compared to other large European countries. Germany is in the process of raising it from 65 to 67. In Italy, it is already 67.

In Britain, the state pension age is set to increase from 66 to 67 in 2028, and then to 68 by the mid-2040s.

This hasn’t stopped parties on the extremes of French politics from arguing that not only should the retirement age stay the same, but that it should be cut.

No party won an absolute majority in the snap parliamentary elections in June and July, but the New Popular Front (NFP), a broad alliance of leftist parties, achieved an upset by gaining the largest number of seats, followed by Mr Macron’s centrist coalition Ensemble in second and the far-Right National Rally (RN) and its allies in third.

France Unbowed, the largest party in the NFP coalition, led by the eccentric Jean-Luc Mélenchon, proposed in its manifesto to reduce the state pension age from 62 to 60.

Both the far-Right and far-Left also want to reduce the number of years required to qualify for the full state pension from 42 years to 40.

Maxime Darmet, a Paris-based economist at insurer Allianz Trade, believes these changes could cost between €10bn (£8.5bn) and €60bn. This, he said, would result in a “huge fiscal hole”, as €70bn of savings are already needed to cut France’s budget deficit to below 3pc of GDP by 2027 – the maximum permitted under EU rules.

The pensions issue is “the only thing the two sides agree on”, according to Mr Darmet.

Last month, France Unbowed presented a bill to repeal Mr Macron’s pension reforms. RN has signalled that it would be willing to vote in favour of the bill to torpedo the policy. Between them, the two blocs have enough votes to do so.

The bill, which is not due to be debated for several months, may fail when it comes before the French Senate, which is dominated by the centre-Right. But the possibility of the reforms being scrapped is worrying economists and commentators.

Felix Feather, European economist at abrdn, said: “France is spending a lot more than the average EU country on social benefits, so spending on pensions has an outside impact on its debt and how it’s viewed by the markets.

“The pensions question is central to France’s long-term fiscal outlook. Demographics mean pension spending is going to expand. The pressure is building and you’re not beginning from a favourable place.”

At 5.5pc of GDP in 2023, France’s budget deficit is one of the highest in the eurozone. The country spends 13.9pc of its GDP on public pensions, nearly twice the Organization of Economic Cooperation and Development (OECD) average.

The gap between retirement age and life expectancy in France is 27 years for men and 23.5 years for women, the largest of any country apart from Greece, according to the OECD.

The International Monetary Fund expects France’s debt-to-GDP ratio to hit 118.5pc by 2027. When Macron came to power in 2017, it stood at 98.1pc.

Concerns over France’s debt levels led ratings agency Standard & Poor’s to downgrade the country’s credit rating in May. Moody’s has warned that it may do likewise if the pension reforms are overturned.

Pushing back the retirement age by two years and extending the pay-in period would buy the country breathing room. Labour ministry estimates suggest the move will bring in an additional €17.7bn in annual pension contributions, allowing the system to break even by 2027.

More work, less pay The idea that the state pension system is in urgent need of reform is less controversial in Britain than across the Channel.

As in France, a shrinking ratio of workers to pensioners risks making Britain’s public pension system fiscally unsustainable. Pension spending in Britain has risen from 2pc of GDP in the early 1950s to more than 7pc today.

Overall spending on the state pension will be £23bn higher in 2027-28 than it was at the start of the 2020s, according to Office for Budget Responsibility forecasts.

However, what should be done about it is less clear.

One option is simply to make people work longer. Decades of rising life expectancy meant that raising the age at which people retired was the silver bullet that helped to keep the state pension system ticking along.

But a recent dip in longevity has complicated the picture. It forced former chancellor Jeremy Hunt to delay a decision on whether to increase the state pension age for a second time.

In the run-up to the general election, Chancellor Rachel Reeves said that there was no justification to increase the state pension age.

The reality is that Labour may have little choice. According to the International Longevity Centre think tank, the state pension age would need to rise to 70 by 2040 to maintain the current ratio of workers per retiree.

As well as being deeply unpopular, this may prove unviable if people are not healthy enough to work.

Around 2.8 million people of working age are not in the workforce due to ill health, including mental health conditions such as anxiety and depression. This is up from around two million before the 2020 lockdown.

By the age of 70, only 50pc of adults in England and Wales are disability-free and able to work, official figures show.

Liz Fairweather, director of the charity Age UK, said a rising retirement age is a “terrifying prospect” for anyone approaching retirement age who is ill, unemployed or cares for a loved one.

She added: “Hundreds of thousands of people are living miserable lives behind closed doors, struggling to get by on working age benefits and dreaming of the day when they gain the security of being able to claim their state pension.

“The last thing they need is for the state pension age to move further beyond their reach.”

Yet the alternative to upping the retirement age – reducing the generosity of the state pension – would also be politically toxic.

Labour has committed to maintaining the Tories’ “triple lock” policy, which ensures that the state pension rises each year in line with the highest figure of inflation, wage growth, or 2.5pc.

The cost of the state pension stood at £124bn in 2023-2024, according to OBR estimates. But this cost is forecast to rise to £158bn in 2028-2029 – a £34bn increase – because of the triple lock.

The French have been even more reluctant to give up lucrative benefits, despite enjoying some of the highest state pension entitlements relative to the cost of living in Europe.

The French state pension is based on a final salary calculation. On average, pensioners receive around 74pc of their pre-retirement earnings compared to just 58pc for British retirees, and an average of 68pc across the European Union, according to the OECD.

By September, it should be clear which political grouping will lead France’s new government, with the power to determine the country’s fiscal policy.

The pensions issue will be viewed as a bellwether by investors and the markets, Mr Feather said.

He added: “What happens to [the reforms] will reflect the direction the new government is going to go.

“If they are overturned, then it shows the priority will not be fiscal consolidation, as it has been under Macron.”