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The Case 22 April Apr 2020 0649 22 April 2020

Minimum pension guarantee, a social security ‘parachute’ for young Italians

The Italian Labour Minister Nunzia Catalfo and the trade unions have held their first meeting and work has now begun on creating a minimum pension guarantee for those who entered the working world after 1996 and who, as a result of their intermittent careers, risk getting a very small pension check when they retire.

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At the beginning of February, the first meeting was held between trade unions and the Italian Labour Minister Nunzia Catalfo and Italy has now begun to talk about a minimum pension guarantee for its young people. This was a significant first step, as it is the first time that the Italian government has made a political undertaking and has acknowledged the proposal for a minimum pension guarantee put forward by Italy's three largest union federations (CGIL, CISL and UIL). The aim is to ensure that young people are provided with uninterrupted social security coverage and that their future pension checks do not take them below the poverty line as a result of intermittent careers, low salaries and periods of unemployment.

“Now is the time to take action so that young people get a decent pension in the future. After all, the data are clear: CENSIS (Centre for Social Studies and Policies) has estimated that in 30 years’ time around 5.7 million people risk getting a pension check that is below the poverty threshold. We can no longer stand by and watch this happen,” Minister Catalfo wrote at the end of the meeting. “What we have in mind – and will develop also through our discussions with the Unions - is a measure to ensure that young people with intermittent careers are covered for the gaps in their pension contributions.”

What are the Unions’ proposing exactly? The aim is to protect those people who entered the working world after 1996, when the so-called ‘effective contribution’ system came into effect whereby pensions were calculated wholly on the basis of the contributions paid. They will be guaranteed a pension based on the effective contributions they have paid together with ‘token’ contributions that take into account periods of intermittent employment, training and re-skilling, low salary, unintentional unemployment and as carers for family members who are not self-sufficient. In short, their pension checks will be calculated based both on their effective as well as these ‘token’ contributions.

Another proposal is to simplify the procedure whereby Italians can obtain pension credits for their university years and to foresee bonus contributions for working mothers.

Now is the time to take action so that young people get a decent pension in the future

Nunzia Catalfo, Minister of Labour and Social Policies

What we are talking about is a kind of ‘parachute’ pension for young people which, in the Unions’ opinion, should raise the thresholds currently required to claim an early retirement or old age pension. There should be a minimum basic sum which – the three main Unions explained – cannot be lower than the ‘Citizenship Guaranteed’ minimum pension of 780 euro a month. This sum should increase according to the number of years worked and should also include those ‘token’ contributions for periods of training or re-skilling undertaken to improve career prospects. Not social welfare then, but rather a measure to support young people provided that they are active on the job market.

The meeting between Minister Catalfo and the Unions was also attended by representatives of the Treasury, on hand to estimate the sum required to fine tune a measure of this kind. Once the state pensions agency INPS has provided its figures, the task will be to understand how many people could potentially benefit. But they will also need to work out how periods spent in education will be certified so that they contribute to building up a pension.

The possibility of spreading the economic impact over a number of budget legislations has also been envisaged. However, the framework of this measure will depend on the funds made available which, the Unions say, should come from general taxation.

However, the ultimate goal remains unchanged: to guarantee a decent pension for those who, under the current rules, would get a pension calculated wholly on the contribution-based system. Which in real terms means: the less you pay in, the less you get out. In a labour market characterised by intermittent careers, atypical contracts and periods of unemployment, there is a very real risk that people will get a very small pension check at the end of their careers. According to CENSIS, between now and 2050 almost 6 million young Italians risk getting a pension that takes them below the poverty line. They will not even be able to count on the popularity of supplementary pension schemes, still not very common in Italy. But work is now in progress on an integrated pension scheme and Italy will just have to wait for the solutions.

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