Holland Announces The Return of Partial Retirement at Age 60

It was a major campaign promise and now is becoming reality: the partial return of retirement at 60 for longer-than-normal careers was announced last week by the Minister of Social Affairs, Marisol Touraine. It should affect more than 20% of retirees, approximately 110,000-120,000 people next year. For several weeks the effects of this sort of policy was a major debate, including the precise definition of eligibility and the cost of such a reform.

The order will take effect on Nov. 1. It provides a retirement option before the legal minimum age – 62 since 2010- if the person started working as young as 18 years old. In the past, only people had started working at age 17 or younger could retire early. For example, someone born in 1955 can retire at 60 with a contribution period equivalent to 166 quarters, or 41.5 years.

Supplementary to these changes, the government has decided to slightly modify the terms of “contribution”. This was also one of the gray areas of the François Hollande campaign platform. After researching the various possibilities, the government realized that the reform would cost less than initially anticipated, allowing the government to make further reforms such as extending retirement benefits to the temporarily unemployed and mothers. Two quarters will be added to an individual record during periods of unemployment and during to maternity leave. Touraine explained that government wanted “to try to correct some aspects” of the program.

The cost of such a reform would amount to around 1.2 billion euros in 2013 to reach three billion per year by 2017. The program will be financially supported by increased pension contribution rate by 0.2 on salaries earned in 2013. The contribution is shared between employees and employers.

According to the opposition, this contribution increase is the main point of criticism because it handicaps families and business competitive advantage. For Laurence Parisot, President of MEDEF – the main organization of employers – “The reform is not going in the right direction and could be harmful to the economy, from the moment it is financed by higher taxes.”

The next step for the reform of PAYG pensions should come to fruition by June 2013. Francois Hollande hopes to overhaul the reform of 2010, a large symbol of the previous five-years of Sarkozy.

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