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

Listed author(s):
  • Frédéric Gannon


  • Stéphane Hamayon
  • Florence Legros

    (Laboratoire Structure et Dynamiques Financières)

  • Vincent Touze

    (Observatoire français des conjonctures économiques)

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.

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Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/5boabpc9ms84bro8m866dns6kj.

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Date of creation: Nov 2014
Publication status: Published in Australian Journal of Acturial Practice, 2014, vol. 2, pp.33-45
Handle: RePEc:spo:wpmain:info:hdl:2441/5boabpc9ms84bro8m866dns6kj
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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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