Redistribution between and within generations in the Italian social security system

The main Italian Social Security Scheme (the Pension Fund for Private Employees) is considered, and the real rate of return offered to cohorts retiring at 10-year intervals between 1960 and 2020 is calculated. This rate decreases from more than 9% for the 1960 cohort to roughly 2·50% for the 2020 one. While in the past, higher rates could be sustained thanks to an increasing payroll tax, the present system is unbalanced and—apart from possible minor further rate increases—needs either budget support or a cut in benefits. Turning to within-generations flows, the main features of the scheme, as of the 1970–90 period, are examined: a “floor” and a “ceiling”, earnings based benefits, seniority pensions. While the last two workagainstequity, the first two are meant to redistribute from rich to poor, but they have been devised too roughly to be effective. A reform enacted in 1992 by the Amato Government corrected some of these shortcomings, but a new reform is needed and expected.