Launching discussions at this national roundtable was the observation that the Italian pension system has undergone several attempts at reform over the past 25 years. From the Dini reforms to the more recent Fornero efforts, a succession of reform packages have accorded priority to balancing the public finances which underpin the first and most important pillar of the Italian pension system – namely, the state pension. At the same time, efforts have also been made to strengthen the other two pillars (occupation-based pension schemes and individual supplementary pension plans), with mixed results. It was conceded, however, that pension reform is a complex matter impacting on the life plans and goals of millions of citizens, for which reason prudence is called for on the part of policymakers and legislators. Indeed, on too many occasions the rules of the game have been changed with the effect of undermining confidence in the stability of the system.
Today, the urgent need to balance the public accounts is compounded by the pressing need to find alternatives to financing through banks in order to support the country’s manufacturing base and business community, as well as to kick start investment after years of stagnation.
It was argued that second- and third-pillar social security provision is gradually growing, and that pension funds, with their long-term outlook, would seem to be the best-equipped financial players to meet this challenge. Nevertheless, it was conceded that there are many problems, ranging from the small size and inefficiencies of pension funds, to governance practices that are not always transparent and regulation that does not always act as an incentive. The result is that Italian pension funds invest little in the country’s economic system.
The participants thus identified a need to facilitate an increase in the size and efficiency of pension funds, to stimulate competition, and to encourage the establishment of funds of funds to invest in the real economy. At the same time, there was also a perceived need to increase the awareness of Italian households that first-pillar social security (or the state pension) will soon no longer be sufficient to ensure a decent standard of living. Achieving this will require appropriate awareness-raising mechanisms on the one hand, as well as tax incentives on the other.
In this regard, the participants were at pains to stress that the European Union – with its feverish efforts at financial regulation over the past few years – has become a pivotal player. With the launch of the Capital Markets Union project, the direction in which the EU is moving is clear: Europe’s traditionally bank-centric system now aims to promote alternative financing channels by facilitating the access of businesses to capital markets and breaking down cross-border barriers.
In conclusion, it was suggested that only as part of a larger European undertaking and a longer-term political vision will occupation-based and individual supplementary pension funds be able to help Italy win the dual challenge, namely: on the one hand, that of injecting the necessary lifeblood into the country’s economic system to ensure a return to growth, and, on the other, that of maintaining pension promises without violating the social pact between generations.