ITALY - Consultants have slammed "watered down" pension reforms approved as part of the 2008 Budget, claiming they will do little to resolve the huge financial burden and inequities of the system.
The Protocol was agreed last summer by the government, unions and employer representatives and introduced labour market reforms. It also amended social security pension rules, as far as pensionable age for early retirement, and the calculation of annuity rates for the notional defined contribution (DC) system that was introduced in 1996.
Livio Mocenigo, managing consultant at Watson Wyatt Milan, said that under the pressure from unions and parts of the government coalition, the government did not increase the age for accessing early retirement pension to a minimum of 60 years from 1 January this year as previously approved by the Berlusconi government back in 2005.
It instead decided to smooth out the impact of the change, by phasing in measures over time. Mocenigo said, in effect, it would still be possible to retire early on very favourable conditions until the end of 2010.
He said: "Italy has a notoriously poor track record for implementing pension reforms. So it came as little surprise when essential early retirement changes were reversed and important measures to reduce the unsustainable pension deficit were postponed."
Claudio Pinna, spokesman at Hewitt Associates in Italy, said the country was still awaiting the final reforms. He added the retirement changes were reversed because the Government had a problem with the former communists that were part of the coalition and the unions.
"This for sure won't be the final one, because the new disposals do not take into consideration all the main financial indicators," Pinna said.
Watson Wyatt estimated the decision to postpone the revision of the annuity rates to the year 2010, for those retiring on the DC notional system, would generate a decrease in the pension paid of between 6-8%, depending on effective retirement age.
Pinna of Hewitt said: "This is the only right thing they did, probably not in the right way. They have increased the annuities factors, based on current life expectancy to use in order to calculate the final pension under the DC notional system. Using the new factors, pension provided at retirement will be lower."
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