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Sustainability of the French first pillar pension scheme (CNAV): assessing automatic balance

Author

Listed:
  • Frédéric Gannon

    (EconomiX)

  • Stéphane Hamayon
  • Florence Legros

    (Laboratoire Structure et Dynamiques Financières)

  • Vincent Touze

    (Observatoire français des conjonctures économiques)

Abstract

In this paper, we apply two types of automatic balance mechanism (ABM) to the French first pillar pension system for private sector employees (CNAV). One is based on a tax gap ratio (TGR-ABM) and the other is the smooth ABM (S-ABM) developed by Gannon, Legros and Touzé (2013). Two long-run forecast scenarios over the period 2014-2063 are analysed. The first is optimistic (“benchmark”) and assumes a 4.5% unemployment rate and a 1.5% productivity growth rate in the long run. The second is more pessimistic (“prudent”), with a 7.5% unemployment rate and a 1% productivity growth rate in the long run. For the benchmark (respectively prudent) scenario, a TGR-ABM requires, now and for the next 50 years, a 2.8% (respectively 6.3%) decrease in pensions and a 2.9% (respectively 6.7%) increase in the tax rate. An S-ABM requires, for the benchmark (respectively prudent) scenario, an immediate 1.5% (respectively 3.6%) decrease in pensions and a 1.4% (respectively 3.5%) increase in the tax rate. In the long run (50 years), an S-ABM requires a 4.5% (respectively 9.1%) reduction in pensions and a 4.5% (respectively 9.1%) increase in the tax rate.

Suggested Citation

  • Frédéric Gannon & Stéphane Hamayon & Florence Legros & Vincent Touze, 2014. "Sustainability of the French first pillar pension scheme (CNAV): assessing automatic balance," Sciences Po publications info:hdl:2441/5boabpc9ms8, Sciences Po.
  • Handle: RePEc:spo:wpmain:info:hdl:2441/5boabpc9ms84bro8m866dns6kj
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    References listed on IDEAS

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    1. repec:dau:papers:123456789/6490 is not listed on IDEAS
    2. Stéphane Hamayon & Florence Legros, 2001. "Construction and Impact of a Buffer Fund within the French PAYG Pension Scheme in a Demo-Economic Model," CESifo Working Paper Series 531, CESifo Group Munich.
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    Cited by:

    1. Frédéric Gannon & Florence Legros & Vincent Touze, 2016. "Sustainability of pensions schemes : building a smooth automatic balance mechanism with an application to the US social security," Sciences Po publications 2016-16, Sciences Po.
    2. Frédéric Gannon & Florence Legros & Vincent Touzé, 2016. "Sustainability of pension schemes : building a smooth automatic balance mechanism with an application to tu US social security," Documents de Travail de l'OFCE 2016-16, Observatoire Francais des Conjonctures Economiques (OFCE).

    More about this item

    Keywords

    Pension scheme sustainability; Automatic balance mechanism;

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