France plans 5.5 billion euro pension cuts to halve social security deficit by 2027

Deficit targets for social security

French Labour Minister Jean-Pierre Farandou announced that the government plans to cut the Social Security deficit to between 12 billion and 13 billion euros in 2027, down from 22 billion euros projected for 2026. The announcement on 30 September 2026, delivered in an interview with Challenges, preceded the presentation of the state budget and the Social Security financing bill (PLFSS) to the Council of Ministers. The executive branch intends to halt the automatic progression of social spending, with a primary focus on pension outlays. According to Farandou, baseline projections showed pension expenditure increasing by roughly 13 billion euros in the absence of policy changes.

Without specific measures, the cost of pensions would increase by about 13 billion euros next year. Half of this increase is due to demographics and the other half comes from the full indexation of pensions.

Pension indexation and tax deduction cuts

To meet the deficit target, the government seeks 5.5 billion euros in total savings from the pension system. A core measure targets 4.1 billion euros through the sub-indexation or partial de-indexation of pensions above 1,260 euros per month, a figure representing 85% of the national minimum wage (SMIC). Payouts equal to or below that threshold will receive full statutory indexation to protect basic living standards. French law typically requires base pensions to adjust each year in line with the previous year's inflation rate, but the 2027 draft suspends universal automatic alignment.

We will not reduce any pension. The question is how much we will increase them.

The remaining 1.4 billion euros in savings relies on personal taxation adjustments included in the draft finance bill. The government proposes reducing the ceiling for the 10% income tax deduction granted to retirees from 4,439 euros to 3,000 euros. Farandou stated that parliamentary discussions will evaluate both the tax cap and pension indexation levels, allowing lawmakers to adjust the final composition of the measures.

Incentive retirement age and structural reforms

Beyond immediate fiscal adjustments, the executive branch outlined structural changes to retirement timing. The plan includes the introduction of an incentive retirement age set at a minimum of 65 years. Workers who choose to retire before that threshold will face pension penalties, while individuals who extend their employment beyond 65 years will receive bonus rate adjustments on their pensions. Specific discount and bonus percentages remain subject to forthcoming legislative debate.

In the longer term, Farandou proposed replacing automatic inflation indexation with an annual collective negotiation model involving employer organizations and trade unions, similar to the process used for setting wages. In a subsequent interview on France 2, the minister stated that the government prioritized protections for low-income beneficiaries, preserving resources for the active solidarity income (RSA), the disabled adult allowance (AAH), and the minimum retirement pension while leaving higher pension brackets open to legislative revisions.