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Pensions: does the revaluation of pensions planned by the government cover inflation?

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After an increase of 1.1% in January, pensions will be revalued by 4% retroactively in July. But throughout the year, retirees will continue to see their purchasing power eroded by inflation. explanations.

Night of tensions in the National Assembly. Within the framework of the review of the reformed budget project, the deputies returned this Wednesday to the release of an allocation of 500 million additional euros to revalue retirement pensions.

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Contrary to the government’s opinion, 186 deputies from Nupes, RN and LR had voted a few hours earlier in favor of an amendment that provided for a cumulative revaluation of pensions by 5.5% in 2022. In a second deliberation, the government finally had the last word by obtaining a 4% revaluation of pensions retroactively in July, after +1.1% in January. This is a cumulative increase of 5.1% (1,011 x 1.04), less than that claimed by the opposition.

This 5.1% corresponds to the inflation estimate formulated by the Government for the whole of 2022. “Yes, we fully protect our pensioners against inflation. Retirement pensions are increased by 5.1% in 2022: 1.1% in January and 4% since July, “reacted Bruno Le Maire on Twitter. The opposition deputies who demanded an increase of 5.5% modeled themselves on their part in INSEE forecasts.

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Uncompensated inflation throughout the year

In reality, these two pension increases do not make it possible to fully cover inflation in 2022. To achieve this, the increase granted as of July would have had to be much higher or, failing that, it would have been applied retroactively to January 1.

Take the example of a retiree who receives a monthly pension of 1,000 euros from old-age insurance at the end of 2021. This same pension rose to 1,011 euros from January to June with the 1.1% increase decided at the beginning of the year, and it will be of 1,051.44 euros in the last six months of the year, taking into account the new revaluation of 4%. This corresponds, as of July 1, to an overall increase of 5.1% compared to the level at the end of 2021.

Throughout the year, on the other hand, our pensioner loses purchasing power. In total in 2022 he will have received 12,374.64 euros (1,011 euros per month between January and June, 1,051.44 between July and December), compared to 12,000 euros in 2021. That represents an increase of 3.1%, far from the level of inflation estimated at an average of 5.5% throughout the year.

To fully offset inflation, the scale of the revaluation in July should have been around 8.7%. In this case, our retiree would have received 12,660 euros in the year (about 1,099 euros per month between July and December), that is, an increase of 5.5% equivalent to the INSEE inflation projections for France as a whole in the year 2022.

For comparison, the evolution of the minimum wage will continue to be strictly correlated with inflation. In August, the minimum wage will experience its third rise since January (+2.1%, after +2.65% in May and +0.9% in January). Assuming this is the last of the year, an employee paying the minimum wage will receive a total of around €15,634 in 2022, up from €14,850 last year. That is an increase of 5.3%, situated between the average inflation forecast of the government and that of INSEE.

New update in 2023

If the revaluations of basic retirement pensions will not make it possible to compensate for the increase in prices in 2022, Bruno Le Maire promised this Wednesday in France inter to a new increase “in January 2023 (… ), because inflation will increase for then.

As for supplementary pensions, the boost will not come before November. On this date, the directors of Agirc-Arrco, a scheme for private sector employees, will meet to decide on a possible revaluation and its scope.

Author: Paul Louis with Pierre Kupferman
Source: BFM TV

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