Academic warns of Italian pensioner poverty
ITALY- Italian workers face the risk of relative poverty if they do not save for their pensions, says the president of the National Commission for the Research on Social Exclusion.
Giancarlo Rovati, also a professor at the Milan-based Universita’ Cattolica, stressed the importance of saving to boost the state pensions.
He told a conference organised by the European Institute of Public Administration that a 60 year-old worker with 35 years of contribution retires today with a pension worth about 67% of his wages.
“In spite of insufficiencies and inequalities, it is possible to say that the Italian pension system has contributed in the last three decades to reducing the risk of poverty among the elderly generations,” he said.
But as the defined contribution model kicks in - introduced in the 1990s and endorsed by the new reform - the ratio is going to fall.
In 2020 a worker who has made no extra pension provision is likely retire with just 56% of his wages – falling to 48.1% in 2050.
Rovati explained that awareness of impoverishment risks is low because DC is being ‘slowly extended’.
“In 2020 it is forecasted that two thirds of pensions will be calculated using the defined benefit method and only in 2050 there will be a significant inversion,” he argued at the conference.
In 2005, in 96.6% of cases pensions will be calculated in terms of defined benefits, DB. The rate will do down to about 71% in 2020 to fall to 4.9% in 2050, when a little more than 53% of pensions will be calculated with the DC method.
“Facing these estimates,” Rovati said. “There are three strategic ways to pursue: increase the employment rate, postpone pension age and develop an alternative pension system”
A rise in employment of just one percent would be “more effective than any financial engineering on pensions.”
Rovati also stressed that employers should be more prepared to retain workers over 50.