{"id":9141,"date":"2025-06-13T15:08:55","date_gmt":"2025-06-13T13:08:55","guid":{"rendered":"https:\/\/www.rivistaeco.com\/?p=9141"},"modified":"2025-06-13T15:08:55","modified_gmt":"2025-06-13T13:08:55","slug":"will-they-pay-for-our-pensions","status":"publish","type":"post","link":"https:\/\/www.rivistaeco.com\/en\/2025\/06\/13\/will-they-pay-for-our-pensions\/","title":{"rendered":"Will They Pay for Our Pensions?"},"content":{"rendered":"

How can we ensure that young people will have adequate pensions? It\u2019s good that they start thinking now about long-term investing. It\u2019s essential that governments stop continuously changing the rules, relieve families from the burden of caring for non-self-sufficient individuals, aim to curb the decline in the number of contributors, and provide oversight for all forms of pension schemes. Meanwhile, eco turns one year old, and it\u2019s time to introduce a few changes.<\/em><\/p>\n

 <\/p>\n

Will young people ever receive a pension? It\u2019s a question I\u2019m asked at every public event. It seems to worry parents more than the young people at the start of their careers. The youth appear resigned to receiving smaller pensions, though that future still feels far off. Nevertheless, it would be wise for them to start thinking about it now: to seek jobs that include pension contributions and to ensure their employers actually pay their full share. Under the contribution-based system, the payments made early in one\u2019s career are the most valuable for pension calculations\u2014exactly the opposite of the previous earnings-based system, which provided pensions for their parents. Back then, it was mainly the salaries and contributions from the final years of work that counted.<\/p>\n

But let\u2019s return to the question that worries so many families. It\u2019s poorly framed. The issue isn\u2019t whether today\u2019s youth will get a pension, but how generous that pension will be. And the answer depends on personal decisions they can make\u2014but also on external factors that political choices can influence for better or worse. That\u2019s why it\u2019s important for today\u2019s young people (and their concerned parents) to start thinking now about their post-work years and to put the choices that affect their children\u2019s futures at the center of public debate.<\/p>\n

What Young People Can Do to Protect Their Future<\/strong><\/h3>\n

As we show in this issue of eco<\/em>, tomorrow\u2019s public pensions (those paid out by the INPS, to be clear) will be less generous than today\u2019s. Not so much because people will retire later\u2014this will be offset by receiving benefits for a longer time. Rather, pensions will no longer guarantee the same standard of living that individuals enjoyed while working. Until now, pensions have typically provided about 80% of the final salary at the end of one\u2019s career, and the rest could be made up through small jobs or other income, like rental properties. Future pensions are likely to offer around 60% of the last salary\u2014a substantial drop in living standards compared to working life.<\/p>\n

We use the word \u201clikely\u201d because, unlike in the past, future pension amounts are not guaranteed as they were under the earnings-based system. They won\u2019t depend on the number of years worked, but on how the contributions paid throughout one\u2019s working life perform over time. And this performance will largely depend on how the Italian economy fares in the coming years. If we continue to grow at very low rates, as a stagnant economy, pensions will become even less generous. The projections provided by the INPS website (unfortunately not yet available for all job categories) give a sense of what your pension might look like based on your career and economic trends\u2014assuming, of course, that the rules determining these amounts don\u2019t change again before then.<\/p>\n

Given this great uncertainty and the declining generosity of future pensions, it\u2019s essential to think now about post-retirement income. This means long-term investing\u2014setting aside resources that will generate returns far in the future\u2014and diversifying investments to reduce overall risk. If one investment fails, another may succeed. As we\u2019ve seen, the risk tied to mandatory INPS contributions is linked to the performance of the Italian economy (they are invested entirely within our country) and to the risk that future governments continue to change pension rules as they\u2019ve done almost every year over the past thirty years. All this means setting up accumulation plans in pension funds that are not solely invested in the Italian economy\u2014or in any case, making long-term investments while following the general principles outlined in our \u201cUnderstanding Finance\u201d section.<\/p>\n

What Governments Can Do to Protect Young People<\/strong><\/h3>\n

There are many things governments can do to make the pension future of young people more promising and less uncertain.<\/p>\n

The first, already mentioned, is to stop constantly changing the rules to benefit specific voter groups. Some parties in the current governing coalition want to block the automatic adjustment of the retirement age to life expectancy\u2014an adjustment introduced by the 1995 reform. Doing this would hurt young people because it would endanger their future pensions. The automatic adjustment of retirement age is meant to align the extension of our lifespans\u2014one of the great achievements of recent times\u2014with the sustainability of our pension system. As we show by analyzing pension spending over the next 50 years, increased longevity is not a problem for our system under current rules. It\u2019s something to celebrate\u2014especially if we can make those longer lives healthy and enjoyable.<\/p>\n

This leads us to the second key action: planning now how to provide long-term care for non-self-sufficient individuals without placing the burden solely on their families. Young people\u2019s careers\u2014especially those of young women\u2014are currently hindered by family responsibilities that make them irregular and less profitable, as we discussed extensively in the previous issue of eco<\/em>. Irregular careers and lost income significantly affect future pensions. Improving care for the elderly, as we suggest in the following pages, thus provides a double benefit: it increases the well-being of those who can no longer care for themselves and frees up time, energy, and intellectual and human resources for those in their prime working years.<\/p>\n

The third essential action governments can take is to slow the decline in the number of contributors\u2014and possibly even reduce social security contribution rates, rather than increase them, as attempted in the latest budget law, which aims to raise the contributions paid annually by current workers to the INPS. The drop in the number of contributors is the real time bomb threatening the future of our pension system. We must intervene by promoting greater female participation in the workforce, easing the school-to-work transition, slowing emigration\u2014especially brain drain\u2014and managing immigration. These are all topics we\u2019ve addressed in previous issues of eco<\/em>. Measures like these would also help raise fertility rates, since working women today tend to have more children\u2014as do the educated and talented young Italians we lose every year and the first- and second-generation immigrants. Workers already contribute nearly 40% of their pay to mandatory pension schemes (including severance pay allocations). This is the highest level among OECD countries. Further increasing this burden would prevent young people from doing what we mentioned above: investing long term and diversifying their investments to lower overall risk and secure a decent pension.<\/p>\n

The fourth action is to provide oversight and regulation for all pension schemes. Today, as we document, there\u2019s a segment of the pension system that is self-regulated and not subject to public scrutiny regarding its investment choices: the professional pension funds. This is a highly heterogeneous system, with virtuous entities alongside poorly managed ones that neglect long-term sustainability. The main issue with these funds is their narrow contributor base. If the professions they serve decline due to technological shocks, changing public preferences, or other factors, the funds collapse. That\u2019s what happened with INPGI, the journalists\u2019 fund, which was later bailed out by the INPS\u2014meaning by all of us\u2014after poor asset management was compounded by the crisis in the journalism sector. For this reason, these funds are intrinsically fragile. Since they receive mandatory contributions, they cannot be exempt from financial investment regulation. It would also be wise to consolidate pension funds and promote their development. This would help expand our capital market, thus supporting growth and boosting returns on first-pillar contributions\u2014those managed by INPS.<\/p>\n

One Year with eco<\/em><\/strong><\/h3>\n

Like all of us, eco<\/em> is getting older. With this issue, we turn one. It\u2019s been a year full of satisfaction and learning, and we want to build on those lessons. Thanks to your feedback, starting with this issue we\u2019re introducing several changes. First is the graphic redesign. Eco<\/em> is not a news magazine. It\u2019s a journal that features analyses meant to remain relevant over time. Each issue is like a book. That\u2019s why we\u2019ve chosen a format suitable for keeping eco<\/em> on your bookshelf at home.<\/p>\n

We\u2019ve also invested more in charts\u2014the economists\u2019 visuals\u2014rich with data and information. And we\u2019ve made reading easier for those in a hurry, with article summaries at the beginning and an improved digital reading experience. This redesign, with higher-quality formatting for both print and digital editions, comes with costs. For that reason, regrettably, we must raise the price of a single issue at newsstands to \u20ac8.<\/p>\n

There are also editorial changes. We\u2019ve created a new Letters to the Editor section to feature your correspondence. We\u2019re launching a new column, \u201cThe Welfare State,\u201d where we\u2019ll review, one by one, the benefits that a welfare state\u2014like INPS\u2014provides to citizens. The goal is to help everyone understand what benefits they\u2019re entitled to (many are unaware) and to assess their usefulness (or lack thereof). Lastly, we\u2019ve decided to consistently cover sports\u2014not just as a business, but also as a field where it\u2019s easy to measure individual and team performance and productivity.<\/p>\n

We sincerely hope you enjoy these innovations. Let us know what you think.<\/p>\n

\u00a0<\/strong><\/p>\n

P.S. The next issue will be on newsstands May 17 and will focus on European defense.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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