French workers to stay in job two years longer to be eligible for pension

French president François Hollande will lengthen the number of years of required work to achieve a state pension as part of an overhaul of the retirement system intended to trim the deficit.

French workers will have to contribute to the system for 43 years in 2035, up from 41 years currently, prime minister Jean-Marc Ayrault said yesterday.

Contributions by both employees and employers will rise starting next year, though the government will reduce other payroll charges in an effort to contain labour costs.

“There isn’t a retirement reform on one side and economic policy on the other,” Mr Ayrault said. “Our goal is growth. The place of work in our social model is essential. We’re going to reform charges related to family policy so that they’ll weigh less on growth. This will happen in 2014. There’ll be no increase in labour costs next year.”

The pledge to reduce other charges was key to winning support from Medef, France’s biggest business lobby, and keep wages in check when Hollande is struggling to revive an economy the finance ministry expects will barely grow this year.

“The prime minister has extended an olive branch on social charges and labour costs,” Medef president Pierre Gattaz said. The plans are aimed at eliminating the €20 billion deficit facing the pension system in 2020 and keep its accounts in balance until 2035. – (Bloomberg)