Reprocess (economy)

A man takes his retirement when it stops Travailler completely, because its age or the work period that it carried out makes it possible him to leave the Active population, while ensuring him of the Revenu S of retirement guaranteeing of a Standard of living which it considers sufficient. These incomes come from the payment of a Retirement pension by pension funds, and the incomes of the inheritance accumulated during the working life.

The financing of the retirement pensions is different for the Retraite by distribution and the Retraite by capitalization. In general, the worker can choose his starting age to the retirement; its pension will be modulated according to the starting age by a system of rebate and surcote.

In the history, the retirement was a rare and short phenomenon, which became at the 20th century, with the lengthening of the Life expectancy, a very probable prospect.

In certain countries touched by the “Papy boom”, and which anticipated badly the problem by maintaining unchanged their system of Retraite by distribution or the starting age to the retirement, the financing of the retirement pensions (and in addition of the dependence and hospital expenses) poses economic and political problems difficult.

General principles

In the systems of Retirement by distribution, the Cotisations reprocesses are taken are the Salaire S, either on the gross salaries, or on the wages super-crudes.

In France, each pension fund must normally be financially balanced. However, the State can abound the mode or operate transfers between cases to take account of typical locations (strong reduction in the number of cotisants (minor trades of of coal, Agriculteur S, etc), or to support certain workers (Special diets of retirement).

The starting age to the retirement, with a “complete pension”, is modified to take account of typical locations:

History

Originally, the retirement utilized the family solidarity: the pensioners who could not work any more were dealt with by their family, in the majority of the cases her children.

The retirement, historically rare and short, takes its rise in Europe at the 19th century, like a response of Bismarck to social agitation. It spreads at the 20th century with the lengthening of the Life expectancy.

Become a very probable prospect for each individual, the retirement generates uncertainties because of its horizon unusually remote (several tens of years).

The increase in the Life expectancy poses the problem of the financing of the retirements. All the countries increase the age of the departures to the retirement, located in the majority of the European countries at 65 or 67 years. In addition, the entry on the Job market is done later, with the increase in the duration of the studies.

Various retirement schemes

Several great principles of operation, which can be combined, exist.

They utilize regulatory constraints (the State imposes the retirement scheme) and of the decisions personnel. The individuals, according to their preference for the present, their unconcern even their irresponsibility, and in addition the confidence which they have in the operation of the system and management by the Managements and labor, can act on:

  • the choice of the distribution of the Consumption during the life: constitution of an additional saving;
  • the choice of the age of retirement.

The retirement by distribution

See also: Retirement by distribution

The retirement pensions are financed by Cotisation S based on the current hard-working wages of . The membership of this system is made compulsory, it is managed by Pension funds, within the framework of the Social security.

The payments carried out by a worker during his life are thus not directly related to the amounts of retirement which it will receive, even if it accumulates of the “Points of retirement”. Each active deals with quota of reprocessed moment (and will be dealt with itself by the future cotisants). In this logic, cotisant it of today no right in rem has. The system balances by a system of complex key of distribution.

Within the framework of the modes of retirement per distribution, a debate relates to the injustice which would exist between the various generations: in Europe, the “Baby boomers” paid weak national insurance contributions to finance the pensions of a small number of pensioners; become “Grandpa boomers”, they are very numerous and make pay with the following generations, fewer, of the very high amounts of contributions. This system is thus not free from defect, in particular, when the pattern of the settlement by age brackets is not stable.

The product of some Impôt S also contributes to their financing, in certain countries (France).

The political management of the contradictory interests of the pensioners and the cotisants is complicated. It is easier to increase the National insurance contributions employers, which are “invisible” with the eyes of the workers but who however reduce in the long term their wages, that to prolong the ages of retirement, which would however be more equitable.

One speaks about “intergénérationnelle solidarity”, and collective solidarity.

The retirement by capitalization

See also: Retirement by capitalization

In the system by capitalization, a saving is gradually made up during the working life, and it allows the payment of the retirement pensions.

To prevent that certain credits do not constitute any saving, a minimal level of saving reprocesses is made compulsory in the majority of the States. To avoid the nonoptimal behaviors of the agents with limited Rationality, this saving can be fiscally encouraged.

Part of the incomes of the future pensioner is saved with an aim of constituting a capital for the moment when it will decide not to be active more. The form of this saving can take various forms:

The management mode of the inheritance seeks a profitability of long run, and can thus be allowed to take risks of short term; the placement most profitable, in actions and obligations, are privileged. As the age of retirement approaches, the risks of medium term and short term must be reduced, and it saving is moved towards surer, but less profitable placements.

When the worker takes his retirement, two principal possibilities are offered:

  • the pensioner receives the incomes of his capital, and gradually repurchases (désépargne) its capital to face its needs. In this case, if death intervenes before the exhaustion of the capital, the remaining capital will be transferred with its Héritiers. In the contrary case, the pensioner finds himself without resource, and will have to be helped by the solidarity family or taken charges some has minimum by the State;
  • the capital (or part of this capital) is transformed into Life annuity: a fixed income, indexed or not on the Inflation, versed with is reprocessed until its death. This mechanism gives more safety to the pensioner, because it ensures him to profit from an income until the end of its days, some is the age of this death. In this case, the capital used to set up the life annuity is not transferred with the heirs. This system of Mutualisation of the risks makes it possible to effectively face with uncertainty on the life expectancy.

Differences between the systems by capitalization and distribution

The retirement scheme by distribution was set up in 1941 in France, and in other European countries (Germany,…). It was then necessary to ensure the retirement of the people whose saving had been reduced to nothing by the war and strong the Inflation.

This system generally is however not regarded as optimal for the standard of living of the population on the long run. It is subjected to the risks of the Démographie, and it can be unjust. The failures of the retirement schemes by distribution pushes with the installation of systems of Supplementary pension. By an adequate system of imposition and taxation, the solidarity and the reduction of the Inégalité S can be assured within a system by capitalization, which will allow a better economic operation in addition.

A system by capitalization makes it possible to increase the quantity of saving of a country, and thus to finance more Investissement, which increases the total Productivité and thus incomes.

The increase in the saving also makes it possible the national companies to have most of their stock exchange capital had by the nationals. However the distribution between country of the capital of the companies has an influence on the choices of localization of the Production centres, and especially of the Head office. For example, the American Pension funds, which contribute to the retirements of the Americans, now represent nearly 40% of the Capital of the companies of CAC 40. It results from it an imbalance between the European Union and the the United States, which nourishes concerns on the Souveraineté of the European States.

The particular case of the granted systems

In this kind of system, the employer finances by itself and thanks to the whole as of his incomes, the retirements of his former employees.

It is the case of the retirement pensions of the French Public office: the State cotise not for the retirements of the civils servant; it can finance them by means of all its incomes (taxes, taxes,…). It is considered that there is no risk of financing for the State, and thus which it is not necessary for the State to constitute a precautionary saving.

Retirement schemes by country

The Anglo-Saxon countries privilege the systems by capitalization in general, for example the the United States. With the the United States, a minimal pension financed by the State versed with is reprocessed with low-incomes.

In France

See also: Retirement in France

Other countries

August 1st

Life during the retirement

August 1st

The pensioners can choose to move towards geographical places with the more moderate climate. For example with the the United States, in Florida, and France, on the Riviera.

Part of reprocessed settle in old people's homes.

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