Self-Employed: Why the Reform to Increase their Retirement could be a Flop

Pension reform plans for Self-employed in France

The pension reform plans to review the contribution base for self-employed workers to improve their pension rights. But this change may not produce the expected effects.

An interesting goal that might not be achieved. By presenting the pension reform, the government has undertaken to raise the pensions of the self-employed, in particular those who receive the smallest sums such as craftsmen or traders. The executive wants to achieve this goal without increasing their levy rate. How to achieve such gymnastics? By playing on the contribution bases. The plan would be to reduce the basis on which the levy rate for the Generalised Social Contribution (CSG) and the Contribution for the Reimbursement of the Social Debt (CRDS) is calculated.

In parallel with this reduction in the tax base, the one used to calculate pension contributions would be increased. As a result, the self-employed could create more rights for their future pension , without increasing their rate of levies. This new base would take into account the income from the activity before any social contributions with an abatement rate, which would constitute a so-called “super gross” base.

Possible side effects

Such a change should take time. Its technical implementation could be presented this fall in the Social Security financing bill (PLFSS) for 2024, to be implemented in 2025 or 2026. If the deadline seems long, it is because the process is complex and could generate new inequalities, points out the Institute of Social Protection (IPS), a laboratory of ideas bringing together experts in social protection.

Problem, explains the IPS in a note published this Wednesday, July 12, all categories of self-employed not having the same contribution rules, the reform planned by the government may not benefit everyone equally. “One thing thus seems certain, it is that the objective of a neutrality of the reform on the levels of levies in all the independent professions and at all the levels of income is out of reach”, adds the institute which recalls that the reduction in the CSG levy rate will have consequences on the resources of the health insurance, which this contribution partly finances.

The IPS believes this reform is “poorly born” and “does not tick any of the boxes for greater clarity of social security contributions for the self-employed.” He recommends other changes to improve the situation of self-employed workers, such as the application of a new base only to the CSG and the CRDS. It also suggests implementing incentive and profit-sharing schemes, and employee savings and that contributions to collect daily allowances, known as Madelin contributions, are tax and socially deductible.

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