Four remarkable facts about pensions in Italy – Il Post

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The Organization for Economic Co-operation and Development, the organization of the most industrialized countries better known as the OECD, issues a report every two years on the state of the pension system in various countries of the world. The report is called “Pensions at a Glance” and shows, among other things, how the Italian system is one of the most expensive and unbalanced.

The report highlights four facts about pensions in Italy: it is among the countries where pension spending has a greater impact on gross domestic product, where pensioners have higher incomes on average than those who work, and where social security contributions pay workers have the highest share of wages and in which the retirement age will increase the most in the coming years.

Let’s start spending. There are 16 million pensioners in Italy and in 2022 the state will spend 322 billion euros on their pensions: 16 percent of GDP. This is a very high number, twice what the OECD countries spend on average. Another way to interpret this data is based on public spending: 322 billion is a third of Italian public spending.

Besides being very expensive, the Italian system is among those that guarantee a higher income for those who retire. Along with Luxembourg and Israel, Italy is among the three OECD countries where the average income of retirees is higher than the average income of those still working. And it’s not a given, although wages are notoriously low in Italy: the Italian system stipulates that today’s workers are the ones who pay the checks of current retirees with their social security contributions. The unbalanced ratio between average salaries and average incomes of pensioners in favor of pensions suggests that the system is overburdening workers.

This is because in Italy the pension system is defined as “pay as you go”: this means that the contributions paid by workers today are not a treasure that accumulates and will then be their pension, but that the state pays pensions from this money . current retirees. Every worker must pay social security contributions by law: if you are an employee, they are deducted from your salary every month, if you are self-employed, they are paid directly. Social security contributions are therefore only a part of income from work and in Italy are among the highest among OECD countries: on average, workers allocate a third of their total income to the payment of social security contributions, which, in addition to pensions, also serve to reimburse sick leave, parental leave, compensation for work injuries and so on. This is double the OECD average.

Although workers pay a very high proportion of their earnings, the total social security contributions are not enough to pay all pensions and the state must always provide a compensatory part: according to the annual report of the Court of Auditors on the INPS budget in 2021, the share was borne by the public budget at 17 percent. Put simply, this happens for three reasons: the generosity of the system to those who retired in the past, the fact that careers today are much more discontinuous than careers in the past, and the fact that the population is aging.

An aging population means that more and more people are retiring and fewer and fewer people are staying in work and therefore paying contributions. If the pension system remains as it is, the share with which the public budget must cover the shortfall will increase and the payment of pensions will become more and more burdensome for the state. The OECD predicts that the working-age population will decline by 35 percent over the next 40 years. According to the Court of Auditors, the state’s share will rise to 30 percent in twenty years.

Faced with this scenario, the OECD hypothesizes how pension systems will need to change to accommodate longer life expectancies: in general, as life expectancy increases, more countries will need to require workers to stay longer in work.

The OECD predicts that those in Italy who started working in 2022 will retire at age 71 at the earliest, one of the highest among European and OECD countries, second only to Denmark (75). Those who have just entered the world of work will be treated significantly worse than those who have just retired: in 2022 is the real average retirement age, the age at which a person retires on average even with various advances , 64 years, while the retirement age is 67.

– Read also: Because every year there is a different “quota” for pensions.

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