12 October 2007

Italy gains pension reforms approval

The Italian government has announced it will insert a welfare package, which includes pensions reforms, into the 2008 budget measures. Cabinet ministers met to discuss draft legislation after workers and pensioners overwhelmingly supported the reforms in a referendum earlier this week.  Around 81% of the five million pensioners and workers who took part voted in favour of the package.

Two ministers abstained from a vote by the cabinet to approve the draft. But the government claimed to have achieved its aim of gaining widespread support for its package.  Most important of the pensions reforms was a proposal to raise the minimum retirement age.

A law passed by the previous government would have raised this to 60 from the beginning of next year if no new legislation was introduced in the meantime.  According to the latest agreement, the minimum retirement age becomes 58 years in 2008 instead of 57 years now. It will continue to be increased until it reaches 61 in 2013.

There is extra funding to boost the smallest state pensions and special measures to help workers in heavy industries to retire early. But there are doubts about whether Italy has done enough. The country spends between 14%-15% of GDP on pensions and has one of the lowest birth rates in the world.

Mario Draghi, the Bank of Italy governor, expressed misgivings about the pensions reforms during a hearing in the Italian senate on Wednesday, before the results of the referendum were known. “Some of the proposals in the agreement risk distancing the system further from the principles of one based on contributions: uniform treatment for all workers and a strong relationship between contributions and benefits,” he warned.

He was more positive about efforts to boost complimentary pension schemes. He praised new rules, which came into force in January 2007,  which have encouraged workers to transfer severance pay assets into complimentary pensions schemes.

According to the pensions regulator, Covip, 900,000 workers joined complimentary pension schemes in the first nine months of this  year. The total number of worker in the schemes rose from 1.8 million to 2.7 million.

But Draghi told the senate hearing is still to few. In its annual report. which was published in September, Covip  said there are still large areas of the workforce, especially among younger people, who have no complimentary pensions provisions.

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