back
Details Cookies
Hong Kong S.A.R
Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Macron’s pension reform will be fairer, but workers should start their own savings now Macron’s pension reform will be fairer, but workers should start their own savings now Macron’s pension reform will be fairer, but workers should start their own savings now

Macron’s pension reform will be fairer, but workers should start their own savings now

Macro
CD
Christopher Dembik

Head of Macro Analysis

Summary:  Some background and comment on what is happening in France regarding the massive strike against the pension reform.


As you all know, France is going through massive strikes against Macron’s pension reforms.

There is no public transport, and the situation is likely to be worse tomorrow ahead of the PM’s speech giving more details on the reform.

Here some background to understand what is happening:

To sum up, Macron’s reform aims to merge France’s multiple existing state pension schemes into one unique points-based scheme.

He believes that these reforms would safeguard the long-term future of French pensions and make the system fairer.

A great article of the FT on the context https://www.ft.com/content/ceb02e14-1687-11ea-8d73-6303645ac406

Superb explainer published by Reuters on what is at stake https://www.reuters.com/article/us-france-protests-pensions-explainer/explainer-whats-at-stake-in-macrons-reform-of-frances-cherished-pensions-idUSKBN1Y915L

The key issue in my view:

The main issue with the points-based system is that it may not be as beneficial for pensioners as proclaimed by the government. Emmanuel Macron promises a “golden rule” to make sure that the standard of living is maintained. In Sweden, where a similar scheme was implemented 20 years ago, the value of pension points were adjusted downwards when financial reserves or government income were low, as was the case in 2010 and in 2011. Ultimately, Sweden’s reforms increased social inequalities. Unless the lessons of the Swedish system are learned, the same thing is likely to happen in France.

My modest “proposal”:

The French people need to understand they will have to save independently, as did some Swedes, if they want to live comfortably in their retirement years. To some extent, the French already know this. An April 2019 poll for insurer AG2R La Mondiale Matmut found that 45% of the French want to see a mixed pension system that combines public “pay as you go” and capitalization. However, this does not mean they are saving more for their retirement. Only 20% do it on a regular basis. This situation highlights still strong risk aversion, lack of financial skills and preference for real estate investment across the French population.

One way to change these attitudes would be to simplify private pensions provision, and include tax incentives. This is precisely what the “Macron II law” is trying to achieve, with the launch of a new tax-advantaged retirement savings plan, the PER1, on October 1, 2019. All money saved is tax deductible now, and it is only taxed, at a lower rate, when savers reach retirement age and start receiving their payments.  France won’t be able to guarantee the high pensions many of its pensions enjoy today. In the long run, those who can should start saving for their retirement now.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged foreign exchange trading); Type 4 Regulated Activity (Advising on securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.