A MARTÍNEZ, HOST:
France has one of the world's most generous pension systems with the average pensioner receiving the equivalent of about $1,900 a month. Five prime ministers in just two years have been ousted or resigned over how to fund it. In fact, worldwide, aging populations are forcing governments to rethink their assumptions. Here are Darian Woods and Wailin Wong of The Indicator from Planet Money.
DARIAN WOODS, BYLINE: The French retirement system has a lot of different details, but the basic principles are fairly similar to Social Security in the U.S.
WAILIN WONG, BYLINE: What's quite different to the U.S., though, is how much money pensioners receive.
CHRIS MAHONEY: The bottom line is France is way higher than others.
WONG: Chris Mahoney works for the financial company Mercer. She leads its pensions business. And she oversees a report each year that grades retirement systems all across the world.
MAHONEY: The adequacy measure that we use. Think of that as having enough money to have a dignified retirement. France is an A.
WOODS: An A grade. Very good. But can they pay for it?
MAHONEY: France is a D.
WOODS: D on sustainability. So you're saying that the money - it's unclear where it's coming from in the future.
MAHONEY: Right. The reliability of it. And so a D is a really concerning grade.
WONG: To give us more details about what exactly is giving the French system such a low sustainability grade, we spoke to Chris' colleague, David Knox. David puts France's pension spending in perspective.
DAVID KNOX: The cost to the public person or to the government each year is about 14% of GDP.
WOODS: You compare that to the U.S., where pensions take up around 7% of GDP.
KNOX: So you can start to see why the French pension system is under pressure - because it's costly.
WONG: One thing the U.S. has going for many retirees is how much many people have saved up for retirement.
WOODS: In the U.S., the total of all our private and public savings for retirement adds up to about 150% of GDP or a year and a half's worth of economic output.
WONG: That 150% of GDP in the U.S. is largely because of retirement savings plans like the 401(k). Now, David points out there are inequities, like only about 50% of workers contribute. But in France, retirement savings overall are low compared to the U.S.
WOODS: That partly explains why it's been so hard to make any changes to the French retirement system. The French government did try to raise the retirement age to 67, but public anger scuppered that idea. David has some ideas about what a sustainable retirement system would look like.
KNOX: There's not one answer.
WONG: David envisions a system where the government pays a universal base pension, maybe 25- to 30% of the average wage. That's just paid to everybody over a certain age, and that age increases automatically over time as life expectancy increases.
KNOX: It's not a political decision. It's a semi-automatic decision.
WOODS: Then David would like to see the government mandate that everyone saves a share of their income into retirement savings, whether or not you're working full time or casual or self-employed, kind of like a widespread compulsory 401(k).
WONG: David's ideal retirement system is just one vision. But Chris Mahoney says these kinds of changes are going to have to be considered all over the world, not just France, given all of our aging populations.
MAHONEY: The way we work, health care. Like, it has such a broad, sweeping series of implications for societies.
WOODS: Darian Woods.
WONG: Wailin Wong, NPR News.
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