Redemption of quarters as the reform approaches: for whom can this be profitable?

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He wants to go fast. After years spent refining his previous project, Emmanuel Macron finally had to give up on pension reform. During his first mandate, the Head of State showed an ambition beyond measure: he did not propose a simple parametric transformation, but rather to review the system of intergenerational solidarity in depth. It was then, as Planet was able to recall, to switch to a universal and point regime. For the best or for the worst.

This time, the newly reappointed president does not intend to take so long before reforming the French model. “From 2023, there will be a four-month lag, four months the following year,” he said, not without insisting: “As soon as the reform passed during the five-year term, we will shift the legal age of 4 months each year”. We will therefore have to take into account a rapid timetable, consistent with the desire for a parametric evolution of the system. Which could push more than one to prepare shortly for its cessation of activity.

If the reform comes so quickly, some might be tempted to rush their departure. It wouldn’t be very surprising. “Historically, this is a phenomenon that we have already observed on several occasions in the past. This was the case in 2003, but also in 2010”, economist Philippe Crevel recently explained in our columns, for whom it is not necessarily necessary to go faster than the music.

However, preparing for an early departure can have, for some, a reassuring – if not soothing – virtue. “In our current pension system, obtaining a full pension is conditional on a number of quarters of insurance. As a result of the reforms adopted since 1993, the required insurance period has increased from 150 to 172 quarters (duration which will be effective for the 1973 and subsequent generations). For those reaching their 62nd year in 2022, 168 quarters of insurance are required. In order to liquidate your pension earlier and improve its amount, it is possible to buy back quarters”, continues the director of Cercle de l’Epargne.

But, in the current context, who has an interest in it?

Let us first recall, before starting, the course of the procedure for buying back quarters of contributions.

“It is possible to buy back up to twelve terms to compensate for years of higher education on the condition that these years have given rise to the award of a diploma or have led to admission to a preparatory class or in a Grande Ecole”, specifies Philippe Crevel from the outset, not without emphasizing that “the redemption of quarters is also possible for policyholders with incomplete years (less than 4 quarters contributed)”.

In fact, “the amount of redemptions depends on age and income”, continues the expert. “The older the insured and the higher his remuneration, the higher the cost of redemption. It also depends on the option chosen, rate only or quarter and rate. The redemption amount varies from 1,055 to 6,684 euros per quarter (link to the 2022 scale). It should be noted that redemptions are deductible from taxable income”, he adds.

That being said, a majority of policyholders have every interest in waiting for the publication of the official calendar so as not to risk ending up spending a fortune without ever seeing the color of it.

“The quarterly redemption is based on a bet, that of stability in the rules for calculating pensions”, note from the start Philippe Crevel, who generally calls for caution. “In the event of the legal age being postponed to 64, an insured person who bought quarters in order to leave between 62 and 64 could have done the operation for nothing. During the passage from 60 to 62 years, in 2010, the law had provided that the persons concerned could request a reimbursement but which did not take inflation into account and which did not give rise to payment of interest, ”insists-t- -he. Large sums are at stake.

“Before the application of a possible reform to postpone the legal age beyond 62, policyholders who are close to retirement age can make a buy-back to anticipate it”, however tempers the economist , not without recalling that: “The postponement of the legal age will be progressive whatever happens”. “We must wait to know the content and timetable of the reform before committing to the purchase of quarters for policyholders who will leave after 2023 or even 2024. For policyholders under 57, caution is rather to wait for the adoption of the text”, he still judges.