Ageing: Who will pay for pensions?

We live longer. That is excellent news. But it raises a money question that every rich country faces.

In France, the basic pension mostly works on a pay-as-you-go basis. The contributions of those who work pay the pensions of those who are retired.

So everything depends on a ratio: how many workers contribute for each retiree?

In the sixties, there were about four contributors per retiree. Today, a little under two.

Let's do a simplified calculation. Say an average pension of one thousand five hundred euros a month.

With four contributors, each one funds three hundred and seventy-five euros. With two, seven hundred and fifty.

If the ratio falls to one and a half, each contributor must bring in one thousand euros. A third more than with two.

Facing this equation, there are only a few levers. The first: lengthen. Work longer.

Raising the retirement age adds contributors and removes retirees, at the same time. That is why it comes back in every reform.

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The second: lower. Let pensions rise more slowly than wages, or cut their amount.

A third remains, contribute more. But it weighs on wages and labor costs, already high in France.

Every reform doses these levers. None escapes them. The debate is about who makes the effort, not whether an effort is needed.

There is a lever people rarely talk about: immigration. Workers who arrive at working age add contributors.

The twist: these workers also grow old, and will be entitled to their pension. Immigration pushes the problem back more than it solves it.

Others count on the birth rate or on seniors' employment. These effects are real, but slow or limited.

Then there is the big French debate: funded pensions. Putting part of the contributions on the markets, for yourself.

Neighbors have done it, each in its own way. Sweden has put two and a half points of salary on the markets since its reform in the nineties.

The Netherlands relies largely on company pension funds. Relative to its economy, this capital is among the highest in the world.

But funded pensions carry market risk. Retiring just after a crash can cost a lot.

And the transition is heavy. One generation would have to pay today's pensions and save for its own. Twice.

Hence the idea of partial funding, added to pay-as-you-go rather than replacing it. That is the heart of the debate today.

The rules change often, and so do the projections. But the arithmetic does not change.

For you, a practical conclusion: don't count on a single tier. Retirement is also prepared with your own savings.