As every year, between the end of August and the beginning of September, the topic of pensions punctually returns to the fore. Why?

Simple: it is the classic flag to wave in view of the approval of the Budget Law for the following year, which must be passed by 31 December.

In the last 20 years, we have seen no less than 7 changes in regulations since 2004. There are those who propose raising them, those who propose early exits, and those who would touch nothing. But who is right? To understand that, we have to look at the numbers.

The ‘Breakdown System’: The Shattered Base

Our pension system is based on the pay-as-you-go principle, where the contributions of active workers do NOT finance their future pensions, but finance the pensions of workers who are in retirement at that time.

While it is true that the labour numbers show comforting growth, the reality shows significant cracks, starting with two structural problems:

1. Neet: As many as 15% of Italians aged 15-29 are neither studying nor working. This figure places us as the second worst in Europe (although it has drastically decreased from 24% before Covid).
2. Demographic Hell: The real problem is our demographic hell (calling it winter is reductive). Births in the first 5 months of 2025 are down 8% compared to the first 5 months of 2024 (an already horrible year with only 370,000 new births and a 2.6% decrease compared to 2023). The projection is dramatic: in less than 10 years, we will have 6 million fewer workers.

The INPS Accounts: A Huge Cauldron

Given the thinning labour base, let’s go over the numbers of the system.

To cover the INPS budget, the state uses about80% of IRPEF revenue. This means that a large part of the taxes paid by Italians(in addition to social security contributions) serves to finance the pension system, which is the largest item of expenditure for the state coffers: 337 billion in 2024, 15.4% of GDP.

Unravelling the budget, we find 180 BILLION in transfers from general taxation (in 2023 it had been around 160 billion).
These funds, which are not covered by the contributions paid by active workers, serve to finance, among other things

• Regional Welfare
• Bonuses of various kinds
• Survivor’s pensions and the like
• Pension revaluation to ISTAT(5 billion just to give an order of magnitude).

The INPS budget is, in essence, a huge cauldron where direct pension contributions (which are already a massacre for wages by themselves) are mixed with massive state intervention (paid for through further levies on wages).

Rates and the Short Blanket

Let us return to the contributions that feed pensions.
The contribution rate in Italy is 33% on the employee’s gross income (2/3 borne by the employer, 1/3 by the employee). This is the highest contribution rate in OECD countries.

Hence the thought: raising pensions, as one often hears campaign promises, necessarily involves three options:

1. Raising wages: Ideally by raising productivity.
2. Increasing them through debt: But the margins for new borrowing are already small (apart from the fact that it is irrational to go into debt to ‘pay the bill’ for current spending instead of making investments).
3. Raising the contribution rate: But the margins, with a rate already at 33%, seem non-existent.

The most sustainable solution, therefore, is a wage increase triggered by higher productivity, but in the democratic debate every idea is legitimate.

Is the Italian Pension Really ‘Hungry’? A Eurostat Comparison

Italian pensions have always been used for vulgar electoral purposes. The latest proposal, for example, to ‘freeze’ the raising of the retirement age, would cost 3 billion to freeze just 3 months – not exactly a shrewd move.

But is the Italian pension so ‘starving’ compared to the rest of Europe? Eurostat comes to our rescue.

According to the latest survey on this subject, made 100 the salary of a worker, here is the ratio to the pension of a pensioner in the various countries:

Italy, therefore, has one of the highest pension/gross salary ratios in Europe.

The Sustainable Reform: The Role of Fornero

As I have already mentioned, in 20 years there have been no less than 7 corrections to the pension system that, on the whole, have made it worse.

However, there is only one of these reforms that has prevented the system from blowing up: it is called the Fornero Law.

Elsa Fornero was treated, for mere campaigning, worse than a criminal, passed off as ‘the enemy of the Italians’. Every attempt to explain that the Fornero Law was, is and will be the only structurally sustainable law was silenced by the populist on duty.

Yet, the truth is that if you take your accrued pension today, or have the hope of taking it in the future, you have to say thank you ALSO AND ESPECIALLY to the Fornero Law. It introduced an essential sustainability corrective in a system that was (and remains) demographically doomed to collapse.

In the face of these numbers, the question remains: will we continue to use pensions as an electoral bargaining chip, or will we face reality with a bold, productivity-oriented new reform?