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Raising retirement age has stabilized pensions, says OECD

Fornero reforms an important step in sustainability of finances

26 November, 13:46
Raising retirement age has stabilized pensions, says OECD (ANSA) - Paris, November 26 - Italy's public pension spending has been stabilized by reforms two years ago that included raising the retirement age, the Organization for Economic Cooperation and Development said Tuesday.

In a report on retirement and pensions, the Paris-based OECD said that increasing the age at which Italians can draw a pension was "a major driver" towards improving the sustainability of public pensions.

In December 2011, Elsa Fornero, minister of labour at the time, took the controversial step of gradually increasing the 2012 retirement age in Italy to 66 for men and 62 for women in the public sector, in an effort to begin to reduce an extremely expensive social program.

It also increased the minimum number of years of pension contributions needed to retire early, to 42 years for men and 41 years for women.

With those measures, "Italy took an important step to ensure its financial sustainability over the medium term," stretching until about 2050, the OECD calculated.

It figures that the cost of pensions in Italy was 15.4% of gross domestic product (GDP), among the most expensive compared with the OECD average of 7.8% of GDP.

However, reforms including the higher retirement age will reduce pension costs as a percentage of GDP to 14.5% in 2015 and 14.4% of GDP in 2020.

Spending appears to be on track to slowly rise again after that, but should remain below 15.9% of GDP, it added.

Still, raising the retirement age is not enough if Italy is to continue to improve the sustainability of public pensions and encourage retirement savings, the OECD said.

It urged government to also implement policies "to promote employment and employability and to improve the ability of individuals to have longer careers," in which they can pay into pension plans.