Pension differences between the public and private sectors: an analysis through simulations of typical careers

Les différences de retraite entre secteur public et secteur privé: une analyse par simulations sur carrières types

Patrick Aubert () and Corentin Plouhinec
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Patrick Aubert: IPP - Institut des politiques publiques, SG-COR - Secrétariat général du Conseil d'orientation des retraites, INSEE - Institut national de la statistique et des études économiques (INSEE)
Corentin Plouhinec: DREES - Direction de la recherche, des études, de l’évaluation et des statistiques [Paris] - Ministère des Solidarités et de la Santé [Paris, France]

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Abstract: Following the harmonization of pension rules between the private and public sectors, initiated by the 2003 pension reform, some differences remain. Beyond the different structures of the two systems, these differences notably concern the definition of the reference salary (salary based on the 25 best years in the private sector or salary excluding bonuses based on the last six months in the public sector). We simulate the application of both sets of rules to several typical career paths of civil servants. The impact on the replacement rate is not uniform: for the generation born in 1955, who are preparing to retire in 2017, applying the private sector rules would prove more advantageous for a typical Category B employee, but less so for a teacher, and only slightly less advantageous for a Category A+ manager. These results stem from the interplay of factors determining pension amounts with each type of rule: the proportion of bonuses in total compensation for civil service pension schemes (the higher this proportion, the lower the pension amount relative to the final salary), and the level and trajectory of salary progression for private sector pension schemes (the more upwardly mobile the career and the larger the proportion of compensation above the social security ceiling, the lower the pension amount relative to the final salary). A change of employment sector during one's career can have a significant and multifaceted impact on the replacement rate. While it often leads to a lower replacement rate than that obtained by remaining either a civil servant or a private sector employee throughout one's career (assuming identical net salaries at all ages), there may be certain situations where a change of sector leads to a higher replacement rate: for example, for a senior civil servant (category A+) who ends their career with approximately ten years in the private sector.

Keywords: retirement; replacement rate; public-private comparison; retraite; taux de remplacement; comparaison public‑privé (search for similar items in EconPapers)
Date: 2017-03-01
Note: View the original document on HAL open archive server: https://insee.hal.science/hal-05506445v1
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Published in Economie et Statistique / Economics and Statistics, 2017, 491-492, pp.25-42. ⟨10.24187/ecostat.2017.491d.1903⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05506445

DOI: 10.24187/ecostat.2017.491d.1903

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