In Italy, 23 Million Workers Support 23 Million Pensions

The Italian Pension System: Challenges and Future Projections

The Italian pension system is among the most expensive in the world, raising concerns about the sustainability of the current setup.
With over 16 million pensioners and just over 23 million workers financing their pensions through contributions, the system faces demographic challenges that are only expected to worsen in the coming years.

Current Situation: Stability Amidst Demographic Shifts

Recent data from Istat shows that in 2021, there were 714 pensioners for every thousand workers, a slight decrease from previous years.
This stability can be attributed to factors such as increasing the retirement age and measures to limit early exits from the workforce.

Despite there being around 16 million pensioners in Italy, the total pension benefits amount to nearly 23 million (which can be cumulated).
Currently, pension expenditures represent about 16% of the GDP, double the OECD average.
Projections indicate that this figure will continue to rise, reaching 17% by 2020, before a slight decrease followed by another peak in 2040.

Future Projections and Challenges

Italy faces a significant imbalance between its elderly population and working-age individuals, with projections suggesting a steady increase in the dependency ratio.
By 2075, it is estimated that there could be 67 individuals over the age of 65 for every hundred working-age people.

Key reforms, such as the Dini reform in 1995 and the Fornero reform in 2012, have aimed to address some of the challenges by transitioning to a more sustainable contributory system and increasing the retirement age.
However, with pension expenditures expected to reach 337.4 billion euros by 2024 and almost 370 billion by 2027, approving new mechanisms like the ‘Quota 41’ proposal for early retirement with 41 years of contributions regardless of age, raises concerns about the system’s financial feasibility.

In conclusion, while the Italian pension system has shown resilience in the face of demographic changes, future projections point to increasing financial strain.
Policymakers will need to navigate these challenges to ensure the long-term sustainability of the pension system for both current and future generations.