The reform of the pension system goes to the Legislative Assembly
The reform of the CSS legislation, in particular the pension system, is the most recent initiative of the Mulino administration, after the Fiscal Responsibility Law enacted at the beginning of the month (which suffered minor changes in the legislative) and the Budget Law, which was changed substantially by legislators. We anticipate that this Executive draft will also suffer modifications, luckily of minor relevance for the public finances. The bases of the new structure are two: (a) pooling the financial resources of the two sub-systems: the “mixed” and the SEBD, thus unifying the sources of funds for the complete pension payments; and (b) creating a mechanism of “notional accounts” in which each worker owns a virtual individual account (called “notional”). The proposal establishes a mechanism of notional accounts like the one implemented by Sweden in the 1990s and adopted by countries such as Latvia, Poland, and Italy. This design simulates individual accounts for every worker within a unified financial fund (its name is the Unified Solidarity Fund, FUS). In addition to parametric changes in the retirement age and the increase in employers’ contribution to the solidarity fund, the Government must finance around 1.4% of GDP in 2025 (and more in the future). Some measures are proposed that we consider will not be sufficient to fill that gap. A more complete assessment of the impact of the new legislation shall wait until December, when the Assembly completes its evaluation.
Now read on...
Register to sample a report