Contribution Length and Social Security Wealth: The Impact of the French Pension Reform Act of 1993

Using the wave 2008 of an administrative panel database (the Échantillon Interrégimes des Retraités), we quantify the effects of the French pension reform act of 1993 on Social Security Wealth (SSW) for pensioners affiliated to the main base pension scheme which covers private sector workers, namely the Caisse nationale d’assurance vieillesse des travailleurs salariés. This indicator enables us to estimate the effects on lifetime wealth derived from pension rights of delayed retirement and pension penalty on incomplete career resulting from the increase in the required contribution length to obtain a full pension with the reform. We show that pension penalty has a negative effect on SSW for all pensioners, including both men and women of the first cohorts of retirees exposed to this reform i.e. those born between 1934 and 1943. The reduction in SSW due to this penalty is higher for men than for women. However, delayed retirement has a positive effect for men and a negative one for women. For men, the increase in SSW due to delayed retirement is cancelled out on average by pension penalty. For women, the decrease in SSW due to pension penalty is mitigated by raising the retirement age. In addition, the consequences of this reform are not uniform along the sample distribution of SSW, with the pension penalty having a high and negative impact on the lowest levels of SSW and a delayed retirement which does not fully offset this adverse effect in this part of the population of retirees.