The Minimum Pension At 1200 Euros In 5 Questions
As part of the 2023 pension reform, Prime Minister Elisabeth Borne has announced a minimum pension of €1,200, equivalent to 85% of the net minimum wage. This promise, presented as a measure of 'social justice', has yet to be budgeted and raises several questions. We propose to decipher this government announcement in 5 questions.
1- What will be the minimum pension amount?
The reason the government chose to set the minimum pension at 1200 € is because this amount is equivalent to 85% of the net SMIC.
Emmanuel Macron had first mentioned a minimum pension at € 1100 during his presidential campaign. But the SMIC has been revalued since then because of inflation and will probably continue to be revalued during 2023 if the rise in prices continues.
The amount of the minimum pension will now be indexed to the SMIC. It is therefore bound to increase in the years to come.
However, once granted, this retirement pension will be indexed to inflation like other pensions.
2- Is the minimum pension 1200 € gross or net?
It should also be noted that the minimum pension at €1200 is understood in gross.
Once subtracted the mandatory deductions such as CSG and CRDS, retirees will receive a net amount less than the 1200 euros announced.
In total, social contributions represent 9.1% which are deducted from the gross retirement pension.
3- Does the 1200 € amount include the complementary pension?
When the government announces a minimum pension at around €1200, it includes in this amount the basic pension and the complementary pension.
Currently, there is not really a minimum retirement pension but a minimum contributory or Mico set at €8,970.87 gross per year, or €747.57 gross per month.
The minimum contributory allows retirees of the general scheme who have contributed on low wages to receive a supplement to their basic pension. This supplement aims to increase a person's total pension (basic + supplementary) up to a ceiling set at €1309.75 per month.
To be entitled to this supplement, you must have contributed for at least 120 quarters and have reached the age of full payment.
To note: the minimum contributory should not be confused with the minimum old age pension or Aspa (for allocation of solidarity to the elderly) intended for elderly people who have not contributed or have contributed very little to a pension scheme during their lives.
4- Who is concerned by this minimum retirement pension?
The government has announced that the minimum pension at €1200 will affect both current and future retirees.
This measure concerns private sector employees but also the self-employed, artisans and agricultural employees. It does not apply to civil servants because, for a full career, civil servants receive a guaranteed minimum of €1248.33 per month.
Warning: these announcements do not mean that all retirees who receive a small pension will benefit from this measure. To receive this minimum pension, you will have to meet certain conditions such as having a full career at the SMIC and having the age of the full rate.
If you have not made a complete career, that is, if you do not have the necessary number of quarters and the legal retirement age, you will not be eligible for this scheme.
For example, if you started working late, even after this reform, you will have to continue working after the age of 64 to receive the minimum pension at €1,200.
According to government estimates, thanks to this measure, 'nearly a quarter of people among the most modest workers will benefit from an increase in their pension when they retire.'
5- When will the minimum pension come into effect?
The pension reform wanted by the government is to be presented to the Council of Ministers on January 23 and examined by the National Assembly from February 6 for enforcement on September 1, 2023.
The minimum pension at € 1,200 should therefore apply to future retirees from the entry into force of the text.
Regarding the extension of this minimum pension to current retirees, adequate funding has yet to be found (as the measure would cost nearly €3 billion).
We will therefore have to wait for the result of future consultations with political and trade union organizations. But the Prime Minister Elisabeth Borne has shown herself determined on this point, stating 'I can confirm that the objective is to move to 85% of the SMIC for current retirees from this year.'
If the measure is finally extended to current retirees, it is estimated that nearly 2 million small pensions will be increased, out of the 15 million retirees in France.