Individuals are not on equal footing in the face of employment, old age, illness and death. They generally try to make full use of an insurance system by retiring as early as possible. In France early retirement also results from a labour market on which seniors facing their first health concerns cannot easily participate.
The pension organisation attempts to prevent such behaviour by imposing a minimum retirement age with actuarially non-neutral penalties. The healthcare organisation considers coercive measures in order to curb the growth in costs of daily sickness allowances.
In the context of the project led by the current French government of a future points-based pay-as-you-go unified pension scheme a phased retirement system is tested. The functionalities of this system are designed to foster an increased degree of self-determination for the individual without jeopardizing the sustainability of the social protection. The target population of this phased retirement system consists in persons who could remain longer in employment provided that they work slightly less intensely without losing too much in purchasing power.
The model of unified pension scheme is calibrated on a typical points-based scheme like French second pillar Agirc-Arrco, using a standard career and fixing a 50% replacement rate. Then we introduce the possibility to reduce the working time by 20% maximum, continue to acquire points on this new basis, and simultaneously receive an early pension representing a fraction of the pension points already vested. The system is calibrated so that while an individual retires later with a similar level of pension, the outcome is actuarially neutral for the unified pension scheme.