Pensions, an increasingly bigger problem, perhaps unsolvable

More pensioners than workers. We have a social security problem in Italy. In 2050, 35% of the population will be over 65. One in three Italians of retirement age and a very low level of fertility (1.2 children per woman) weigh and will weigh heavily on the public accounts and those of the INPS which could be in the red of 20 billion already in 2032.

There are several factors that suggest that the Italian pension system will have serious problems in the long run. The population is aging (within a few decades one in three Italians will be over 65), the demographic decline is now well established and the discontinuity in work associated with low incomes with the consequent inadequacy of contributions is now a fact. All this means in the near but not too distant future: too many pensioners with too few active workers and monthly allowances that are not adequate for the cost of living. The not rosy forecast comes from the INPS (CIV) Steering and Supervisory Council, and from the OECD, which underlines how that fertility rate (1.2 children per woman) places Italy among the countries with the highest birth rate and this “it endangers the prosperity of future generations.” And the presence of migratory flows will not be enough to balance the balance over the years.

According to the Civ’s forecasts, at the hearing of the control commission on social security institutions, this low fertility combined with longevity and therefore with the fact that in just over 25 years 35% of the population will be over 65 years old will put the INPS accounts in the red . “The combination of the two trends proves the so-called inversion in the age pyramid,” explained Civ president Roberto Ghiselli.

The financial situation will turn into a deficit in about ten years, going from +23 billion in 2023 to -45 billion in 2032, and negative operating results that will worsen over the decade from -3 billion to -20 billion. However, INPS underlined that we are talking about forecasts, not alarms for accounts which, at the moment, are in order. But effective policies are needed to avoid the envisaged scenario. The President of INPS Gabriele Fava spoke of “the need to rethink the welfare system”.

In 2023, pension spending was 304 billion euros, +7.4% on 2022 mainly due to the revaluation of pensions due to inflation. Revenue was 536 billion euros: 269 billion in contributions (+5.1% over 2022) and 164 billion in current transfers from general taxation (+3.3%). Overall expenditure was 524 billion euros, of which 398 billion for institutional services (+4.55%). The additional 7.4 billion in Gias transfers (Management of welfare interventions and support for social security management) which have also grown due to the increase in the single universal allowance weigh heavily.

The accounts are OK at the moment, therefore, but the forecasts remain: those too many Italians of retirement age (35% in 2050) and above all that growth in the number of pensioners in the coming years is disproportionate when compared to the quantity of active workers. This will be a problem. One is already expected in the medium term reduction in the ratio between members and pensioners: from 1.45 in 2023 to 1.41 in 2032. And the trend is constantly increasing.