PRESS RELEASE
6
th
october 2016
PUBLIC FINANCES AND ACCOUNTS
CIVIL SERVANT
PENSIONS
Further changes still need to be pursued
More than 10 years after its previous report on central government civil servant pensions, the
Cour des comptes has once again carried out an analysis of civil servant pension schemes,
including
local
government
and
hospital
civil
servants.
It
has
examined
their
specific characteristics and progress with regard to the financial sustainability and fairness
objectives set for the entire pension system by the Act of 20 January 2014.
The important reforms implemented since 2003 have gradually helped civil servant pension
schemes to converge with those of employees in the private sector on several main points, in
particular with regard to retirement age and the pension replacement rate relative to professional
income. However, the progress achieved remains fragile and partial, especially with regard to the
financial sustainability of the schemes and the continuation of efforts to converge public and
private sector pension benefits.
After analysing various scenarios for the structural reform of civil servant pension schemes,
the Cour des comptes has identified measures that can be used to develop the rules
applicable to civil servants and has drawn up recommendations to reinforce financial
management and governance.
Significant reforms introduced since 2003
The pension scheme for central government civil servants and the pension scheme for local government
and public hospital workers collectively concern some 3.8 million active civil servants and almost 3 million
pensioners. They represent a serious issue for public finances: €58bn in expenditure in 2014 – including
€41.3bn for the central government and €16.9bn for local government and public hospital workers (
caisse
nationale de retraites des agents des collectivités locales
– CNRACL) – which accounts for 5.6% of
overall government expenditure and 17.1% of government operating expenses.
This expenditure has increased sharply over the past 25 years, due to a rise in the number of pensioners
and a steady increase in the amount of pensions paid out, leading to an increase of more than 40 points
in the central government employer contribution rate and weakening the financial situation of the
CNRACL.
Even taking into account the impact of expenditure areas and of differences in demographic
situations, employer contributions are considerably higher for civil service pension schemes than for those
in the private sector.
Although excluded from the initial measures taken in 1993 to curb the momentum of private sector
pensions, civil service pension schemes have been significantly reformed since 2003. The pension acts of
2010 and 2014 have since been applied in the same manner to civil service and private sector schemes.
These reforms have led to major changes. The convergence of pension rules between the civil service
and the private sector has been achieved with regard to several key points: the pension eligibility age for
sedentary civil servants, the insurance period, and financial incentives to work longer are now
harmonised. Civil servant contributions are currently being aligned with those of the private sector.
Significant management reforms have also been undertaken, such as the creation of a central
government pension budget and the central government pension service and the modernisation of the
management of the pension service for local government and public hospital workers.
Despite these changes, major differences remain between the civil service and private sector schemes.
They include the institutional organisation and the pension calculation methods. They also cover family
and marital rights and the taking into account of time worked for the insurance period. Lastly, over
700,000 civil servants included in the “active category” due to the specific risks or difficult working
conditions associated with their position, may benefit from early retirement, a system that does not exist in
the private sector.
Delicate progress
Aligning several pension rules in the civil service with those of the private sector has helped to bring about
convergence between the pension schemes. The retirement age for civil servants has been extended by
two years and is now almost identical to that for private sector employees, except for “active category”
civil servants whose retirement age remains much lower (four years on average). This situation can give
rise to equality issues if it concerns an occupation that exists both in the public and private sector, such as
assistant nurse.
Despite different calculation rules, the average pension replacement rate relative to professional income
is comparable between civil servants and private sector employees. But, this convergence remains partial
and fragile. It covers significant disparities between civil servants alone and between civil servants and
private sector employees, depending on their position and the pay structure. It may also be reversed due
to the expected reduction of the replacement rate in the private sector, because pensions are calculated
based on the 25 best-earning years for the general scheme and on the employee's entire career for
supplementary pensions, whereas the calculation of pensions based on the last six months of salary
could help maintain civil servant pensions.
Due to their demographic degradation and the benefits specific to certain categories of civil servants, their
pension schemes will continue to weigh on public finances. The central government civil servant scheme
can only be brought back into balance by maintaining a high contribution rate, which will weigh on
government expenditure. The CNRACL will have to increase its contribution rate to keep financial
balance.
Further changes still need to be pursued
In order to guard against these risks, the Cour des comptes has carried out an in-depth analysis of a
number of structural reform scenarios concerning the civil service pension schemes, including: the
immediate or gradual termination of these schemes, by affiliating civil servants to pension schemes of
private sector employees; the financial affiliation of the civil service schemes to the private sector
schemes, the creation of a single pension scheme for civil servants, by merging the central government
civil servant scheme with the scheme for local government and public hospital civil servants. Although the
scenarios involving the affiliation of civil servants to the common law schemes would be the most
ambitious in terms of equity between the public and private sector, they would also be socially sensitive,
particularly due to their very significant impact on certain categories of civil servants such as teachers,
technically complex to implement, and could weigh heavily on public finances.
The Cour des comptes has examined other possible changes that would be easier to implement and
would be consistent with the reforms made since 2003, without calling question the very existence of civil
service schemes. It has identified seven levers with a view to gradually adjusting certain parameters used
to calculate civil servant pensions, such as extending the reference period from 6 months to 5 to 10 years,
increasing the contribution base and the pension calculation base by integrating a portion of the
premiums, deleting certain bonuses, changing the rules relating to the active categories and gradually
harmonising family and marital rights with those of private sector pension schemes.
Lastly, the Cour des comptes has drawn up several recommendations in order to strengthen scheme
governance and financial management. The creation of a central government civil servant retirement fund
and the reinforcement of the local government and hospital workers scheme’s management and expertise
skills would represent important progress in this regard.
Recommendations
The Cour des comptes has drawn up eight recommendations mainly aimed at:
•
creating a central government civil servant retirement fund within the next three years;
•
reducing the number of regional management centres and examining the creation of a centralised
hub;
•
creating an independent management board for the CNRACL which would operate under the Board
of Directors;
•
setting more ambitious administrative savings targets for the CNRACL;
•
examining the possibility of implementing increased contributions for employers of “active category”
civil servants;
•
honing the impact and the procedure for implementing the seven adjustment levers for civil servant
pension schemes that it has identified.
Read the report
PRESS CONTACT:
Ted Marx
Head of communication
T
+33 (0)1 42 98 55 62
tmarx@ccomptes.fr
Denis Gettliffe
Head of Press Relations
T
+33 (0)1 42 98 55 77
dgettliffe@ccomptes.fr
@Courdescomptes
ccomptes