How to Help Generations Coexist at Work and Save PensionsTHE HYPOTHESIS OF FRANCESCO VALLACQUA IS THAT WORKERS WHO HAVE ARRIVED TO WITHIN A CERTAIN NUMBER OF YEARS FROM RETIREMENT WOULD EARN THEIR INCOME PARTIALLY FROM PARTTIME WORK AT THE COMPANY WHERE THEY ARE EMPLOYED AND PARTIALLY FROM AN ADVANCE ON THEIR PENSION
In recent months, Italy has debated reforming the so called Fornero law, which in late 2011 revised the pension system. Any reformer should take into account the effects on the labor market, warns Francesco Vallacqua, who teaches Economics and management of life insurance and pension funds and authored the book La previdenza complementare per i lavoratori pubblici e privati (Supplementary pensions for public and private sector employees, Egea).
“First of all, it is important to think about the compatibility of a new reform with the EU agreements and, in general, with budgetary constraints. Secondly, we must keep in mind that reforms such as the so-called quota 100 will probably lead to benefit cuts because of the application of the contribution-related criterion to contributions paid before January 2012”. Instead of making frequent and small adjustments, Vallacqua proposes the following scheme: a worker over a certain age and with a certain number of years until retirement may shift to a part-time job and supplement his income with an advance on pension. This shall be subject to the condition that the employer hires a younger worker (24 to 34 years old, for instance) for the same total wages cost.
The pension advance leads to an increase in public spending, though. “This is true, but we should calculate whether this increase is compensated by the increase in GDP generated by consumption spending by new workers”. Early retirement, Vallacqua says, has an impact also on supplementary pension provisions, as benefits from pension funds must be distributed earlier.
There is a third way that links private and public systems and it is called opt out, a feature of the Fornero reform that was never implemented. “Employees subjected to mandatory information at the time of hiring are given the opportunity to decide whether to pay a part of their pension contributions to the Italian Institute of Social Security (Inps) or to confer it to pension funds”.
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