09/05/2011
By Matt Ritchie
A series of reforms carried out over the past two decades have halted the upward path of public pension expenditure in Italy, according to the most recent OECD economic survey of the nation.
Reforms introduced since 1992 have had the effect of raising the age of retirement while reducing the level of pensions, relative to average earnings, compared to what would have been delivered by the status quo.
The report states that public pension expenditure was 14% of gross domestic product (GDP) in 2005, the highest of the OECD countries. Government projections now show that the expenditure to GDP ratio is expected to remain broadly stable into the future.
Italy is approaching a “major demographic shift”, as the pension-worker ratio grows to almost 40% over the next four decades. Without the changes, the pension expenditure to GDP ratio would increase to 21%.
“It has therefore been important that successive governments, in a series of reforms beginning in 1992, have worked towards avoiding a cost explosion in the long term.
“The most recent adjustments from summer 2010 raised the retirement age for women in the public sector, made the retirement age conditional on life expectancy, and postponed entitlement to early and old age retirement, through use of the so-called “exit window”, equivalent to an increase in the retirement age,” the report said.
Regarding further reforms, the report finds that further “wage flexibility” may be required, as people work for longer and productivity is “likely to be declining” for many older workers in the years before retirement.
“One other aspect of the pension system may need action. The statutory retirement age of 60 for women in the private sector will need to be increased, since it is now below that for women in the public sector, where, following a ruling on gender equality from the European Court, it is 65,” the report said.
For further information on the survey, click here
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