Capitalization retirement already exists! | EUROtoday

Dhe quite a few voices are elevating to denounce, rightly, the unbearableness of a retirement system by distribution within the absence of inhabitants progress. Indeed, the contributions of property should finance the pensions of a higher variety of retirees. If the distribution system is a failure, the answer can be all discovered: retirement by capitalization. Thus, some wish to arrange a collective and obligatory capitalization, which nonetheless brings faults frequent to our present system.

First, we will be unable to introduce a dose of capitalization with out respecting the previous commitments of the distribution. Consequently, staff would proceed to pay simply as a lot to make sure the pensions of present retirees, and can be extra compelled by the State to pay further contributions in a capitalization fund for their very own retirement. Such a system due to this fact doesn’t clear up the query of the financing of present pensions and the load of contributions on earnings from labor.

Read too Pensions: capitalization moderately than tax will increaseIt additionally implies that the contribution price for capitalization is ready for everybody, whatever the heritage, household and well being points that may differ relying on people and in lifetime. Indeed, the financial savings capability will not be fixed over the period of life, relying on the variations in wages or bills (credit, youngsters, and so on.).

The want for financing will not be the identical both relying on the period of retirement and the extent of earnings desired. The latter can particularly rely upon life-style and the heritage state of affairs. As a part of a capitalization, there isn’t a motive to impose a financial savings price and technique.

PEA, retirement financial savings plan, actual property investments …

Capitalization, free and particular person, already exists. The French represent a capital for retirement in some ways, and the instruments usually are not missing: buy of most important residence, actual property investments, life insurance coverage, PEA, retirement financial savings plan … Many French individuals come to retirement with a capital that they will use on the price of their selection, or convert right into a life annuity. Everyone chooses the placements that the majority correspond to their wants and technique. So why create a obligatory new machine?

This capitalization continues to retire: the over 70s spare 1 / 4 of their earnings. A peak, whereas the logic of capitalization would love this accrued financial savings to be consumed throughout retirement, moderately than to abound the inheritances of the rich courses. This commentary is an indication that our distribution system serves (on common) very largely enough pensions, as a result of cumulative to a powerful accumulation of capital (particularly actual property) by the era of the child growth.

If there’s a vast variety of conditions amongst retirees, it’s the identical amongst staff. Some struggles to generate enough earnings to offer for his or her wants, finance their initiatives (particularly household), and construct capital. Capitalizing, voluntarily or obligatory, wouldn’t be sustainable for them.

Following the contributions

To restore staff’ financial savings energy, obligatory levies have to be lowered on their earnings. This would by the way have the advantage of sustaining their competitiveness within the face of automation. With fixed tax income, we might lower or take away social safety contributions (which already cowl solely two thirds of pension expenditure) and make a switch to different taxes: a harmonized CSG, earnings tax, VAT, or higher, taxes that don’t have any disincitative results on manufacturing (taxes on heritage, on air pollution or on the worth of the land for instance).

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Answer

In brief, it’s a query of going from a Bismarckian system to a Beveridgian system: the pensions comparable to the rights acquired by the distribution system can be funded by the tax and now not by contributions. The finish of contributions would finish the acquisition of recent rights throughout the framework of the distribution system, then encouraging to capitalize because of the rise within the disposable earnings of staff. It is then as much as everybody to arrange their financial savings as they see match based on their wants: the state doesn’t should dictate learn how to predict our previous age.

* Guillaume Bullier is an affiliate professional with the GénérationLibre concepts laboratory.