Italy is considering freezing its retirement age at 67 despite warnings that it could negatively impact the country’s economy. Currently, the country links its retirement age to life expectancy increases, with the age reviewed every two years.
But labour unions are seeking to have the aged fixed to prevent it from being subject to increases, although critics warn that it could put additional pressure on an already precarious national purse. Filippo Taddei, senior European economist at Goldman Sachs said: “Italy’s pension reform — the automatic linkage between the statutory retirement age and life expectancy — is the presenter or host of its Italy’s fiscal sustainability. If people live longer, the retirement age moves up and that keeps the fiscal system automatically in balance.”
He added to the Financial Times: “It gets around a very tight political constraint since changing the retirement age is a super toxic political problem across Europe.”
Earlier this year, Finance minister Giancarlo Giorgetti indicated that he was open to a freeze on the retirement age until 2029, although he stressed that any permanent decision would take into consideration “the overall economic picture”, facing the country.
But a freezing of the retirement age is being backed by the far-right League party that helped to form Giorgia Meloni’s government, with senator Claudio Durigon previously claiming, “if you have the retirement age at 67, it’s a huge problem.”
The country last raised the threshold in 2019, prior to the Covid pandemic, when the age was raised by five months.
It is due to rise once more from January 1, 2027, when it will be increased by three months.
However, plans to fix the pension age have come with a warning that removing the link between retirement and life expectancy will place significant burden on the country’s economy.
Tito Boeri, former president of Italy’s National Institute of Social Security, an organisation which runs the pension system said: “This mechanism is very precious and should not be altered otherwise the consequences for Italian public debt are going to be quite dramatic.”
Italy’s independent parliamentary budget office estimated that a freeze on the country’s retirement age would see the nation’s debt-to-GDP ratio rise to 139% by 2031.
It also added that the cost of pensions on the public purse would increase by 0.4% of GDP between now and 2040.
