The Italian pension system

Transcription

1 With the support of the LLP - Erasmus IP programme of the European Union The Italian pension system By Antonio Costa, University of Bologna, Italy 1

2 Index 1. The Italian pension system s evolution 2. The legislation 3. System s organization and subjects 4. The main provision treatments 5. Social safety treatments 6. Conclusions 2

3 1. The Italian pension system s evolution In Europe, after the industrial revolution, together with economic development, raised the problem of protecting all workers masses who, for various reasons, could no longer perform their work. These people lost their jobs for various reasons such as accident, disease, seniority, and so they could not provide to themselves and to their families. When the masses of unemployed became a serious social problem, also for public peace, in several European countries (especially England and Germany) were introduced systems to support these people paid by state organizations. After this small and necessary introduction, we will briefly analyze the history and evolution of our pension system. It should be anticipated that the policies mentioned above came with a strong late in Italy, due to the Italian economy s slower development then other European countries. Between the end of the nineteenth and the beginning twentieth century, were promulgated several laws establishing insurance against disability and old age. Another important step was the founding of the National Pension Found (Cassa Nazionale di Previdenza) in 1898 that was made to insure workers against disability and reduced-productivity due to old age. This was a voluntary insurance supplemented by a State s contribution and a free entrepreneurs contribution. In 1933 came out the INFPS (Fascist National Institute of Social Security), which took the place of the National Pensions Fund. This reform made it compulsory the retirement for all workers ensuring them a decent lifestyle during the retirement. The system was hold by the contributions, kept from workers wages in proportion to their earnings. This very innovative and well organized system was swept away by war, during which the pensions purchasing power was destroyed by high inflation. With the advent of the Republic, the INFPS was called INPS, but that was just the beginning. In the corporate system, the social protection was an expression of solidarity between workers and 3

4 entrepreneurs. With the republican Constitution, this solidarity s expression was extended to all citizens. From the security establishment as a private insurance, which covers a wide variety of the individual work-related risks, Italy passed to a real welfare state policy. With various measures, especially the law of 4 April 1952, n.218, the social security system was reorganized and was she system turned from found scheme to a share-cut one (that was called contributory). One of the first operation was the one which granted the retirement pension benefit to the public workers. During the early'60s, was ordered a 30% s increase of invalidity pensions and old age pension. After that, the retirement pension was extended to workers. In the same period, was established the social pension for over sixty five citizens without income and was introduced an automatic pensions adjustment to the cost of living. With 1968 s reform, was assured to public employees a pension equal to 80% of salary (with 40 years of contributions). Was implemented the change from contributory system (where the pension was linked to contributions paid), to found one (in which the pension was commensurate with the salary). In the early'70s, were introduced the infamous "baby pensions for public servants that allowed them to retire with only twenty years of contribution coming down for working-mothers and particular categories workers. The first cracks of the social security system has been known since the 80s. Unlike other countries, n Italy the crisis has been misunderstood and perhaps underestimated, and for this reason there wasn t a system s. The government didn t faced the problem with a macroeconomic view, introducing only short term measures such as the contribution s period raising or the retirement age stretching. The rest is recent history: in 1992 the Amato s government raises the retirement age and introduced as the pension s calculation based on the workers average wage received in the last ten years and not over the last five. Just three years after Dini s government changed from a found system to a contribution one. In these years there were two reforms 4

5 performed by Berlusconi s (in 2004) and Prodi s (in 2008) government. This summary does not express all the dynamics of the Italian social security system s evolution. What emerges is the lawstratification (which continues) often caused the governments alternation, which made the system too complex and, according to many opinions, not very efficient. There is also a lack of courage by the political system to take unpopular decisions necessary to keep system s security, preferring remedies that guarantee benefits in the short. In this dissertation I will explain the system s organization looking to its sustainability, adequacy and modernization. 2. The legislation The Italian pension system is regulated by a variety of sources. At the national level by the Constitution, the Civil Code, special laws and, after the Constitution s Title V reform, by the Regions. Should not be forgotten also the important ministerial and governmental regulations in addition to the finance laws contribution. First of all, we must focus on the primary source: the Constitution. This choice is dictated by two reasons: on the one hand by the fact that our fundamental law is one of the few in Europe to speak directly of the social security system. Secondly by the fact that it is essential that the frame serves as a guideline to the law of lesser rank. In this regard is illuminating to read the Article n. 38: All citizens unable to work and lacking the resources necessary for their existence are entitled to welfare support. Workers are entitled to adequate insurance for their needs in the case of accidents, illness, disability, old age and involuntary unemployment. Disabled and handicapped persons are entitled to education and vocational training. Responsibilities laid down in this article are entrusted to public bodies and institutions established or supplemented by the State. Private welfare work is free. 5

6 The first paragraph makes it clear that it is the right of every disabled worker to be entitled by social assistance, regardless of whether is or not a citizen and any discrimination. The second, which is central for this discussion, provides for a system that guarantees workers adequate livelihoods in case of accident, sickness, involuntary unemployment and seniority. As anybody can see, this paragraph is the manifesto of what a civilized country s pension system must do and must be. A careful reading reveals that this estimate includes all the benefits now provided by the Italian pension system: from insurance against accidents, invalidity pensions because of work, to unemployment to retirement. The third paragraph concerns the right to work for disabled and handicapped, the other paragraphs close the system by providing the freedom of private workfare (which for us may be, for example, an integrative pension or an insurance) and the State s obligation to provide, through its organs its participations, to the tasks assigned by this article. Anyway, Article n. 38 is not the only one to deal with pensions in our Constitution. It hasn t to be forget the fundamental Articles n. 2 and 3 s contribution which enshrine the principles of freedom and equality. But another important institution contributes to the system, the Constitutional Court. In fact, through its decisions, it has often changed the forecast correcting state s policy when it didn t deal with the principles of equality and freedom. It seems unproductive to make a list of many sentences in which the Court has addressed the topic in question, but is much more interesting to analyze how it has taken action to correct the system. As regards the principle of equality, has determined that this "is not necessarily unidirectional and directed to extend the scope of a framework more conducive evoked as tertium comparationis, but it can also deploy in removing an unjustified privilege of any more favourable treatment compared to that shown in comparison. 1 This case is fundamental to understand the system. In fact, according to the Court, the system must not only be an assistance institution enlarging the privileges rather than remove them. It 1 Corte Cost. sent n. 349 del 17/12/1985 6

7 must also take account of keeping the public finance which may be affected by enlargement of certain benefits. In other rulings provided that the retirement pension shall be proportionate to the quantity and quality of work done (it s evident in this case the reference to Article n. 36). Interesting was the case in which ruled that "livelihood" means not only the basic needs but also "those who are fit to make demands regarding the worker s lifestyle achieved in relation to his income and social position reached by the category of membership, as a result of work performed. 2 " The Court also said that it s unfair for a worker who enjoys private benefits, to being reduced or even waived state s treatment. Free private workfare, means that workers who uses this chance shouldn t be penalized by losing state s treatment for his choice. The fact, the holding of a private integrative pension, cannot justify the granting of a disproportionate income against the contributions paid. If not, a worker who wanted to take advantage of private assistance, would be restricted his freedom of choice by the possibility of a deterioration and unequal treatment in relation to its contributions, and this is, for the freedom s principle, absolutely unacceptable. The constitutional jurisprudence is crucial in defining the legislative powers boundaries between the State and Regions, regulated by the article n. 117 of the Constitution. Besides it has as to help that institution to determine the benefits level relating to civil and social rights that must be guaranteed throughout the national territory; this is, according to the article above, a state s legislation exclusive competence. An increasingly important role taking, in the process of deregulation, giving to the regulations not only an executive function. The reason why this tool is being more used is that it s less rigid than the law. The regulation s structure better responds to the aim to make government s action more flexible and adherent to the actual needs, having a greater efficiency and effectiveness of public administration s action. 2 Corte Cost. sent. n del 3/01 /

8 Anyway, these sources are not the only one to adjust the Italian social security system, in fact should not be forgotten all the international sources entering our system through Constitution s Article n. 11. These sources comes from the International Labour Organization, OECD, the UN, the Council of Europe and by bilateral or international cooperation in this matter. Such as regards the sources of ILO, UN, OECD and the Council of Europe, it s important to explain that they are not always characterized by the obligatoriness. These are often recommendations and opinions that aren t legally binding (as are the bilateral agreements or international). These documents strength lies in their political strength that makes them de facto binding. In other words the State is not obliged to comply with the opinion or recommendation, however, ignoring these suggestions, can cause a disapproval or resentment in the international community that put the nation in fault in an uncomfortable political position and that the urge to reply. It must be said that the organizations mentioned above may use binding sources, but in these cases is used the international agreement s pattern. The most important international sources come from the European Union which helps, acting within its powers, to regulate various aspects of the member states social security system. Community s sources may either be binding or not. Are binding the Community s founding treaties, the Maastricht s Treaty and its subsequent amendments, the European Union s directives and regulations. European institutions opinions and recommendations are not binding but are very politically strong. More specifically the European regulations that affect us are the prohibition of citizens discrimination, workers free movement and social security. In conclusion is possible to say that the system follows the Constitution s guidelines that all domestic and foreign sources, must follow to ensure that workers will receive adequate assistance. 8

9 3. System s organization and subjects Although our system has long been opened to private assistance (in some cases, this contribution is even solicited by the State), is possible to say that, in the current, social security and assistance are State and local Institutions specific tasks (ex art. Const. 117) even when them don t directly manage this activity. The system is managed by many State and state-owned institutions, but for this discussion s purposes, it seems appropriate to mention the three most important: the INPS, the INPDAP and the INAIL. INPS, National Institute for Social Security, is the Italian main social security institution, from which must be insured all private employees, as well as some public workers categories (the so-called precari unstable workers) and the most the selfemployed (hence the definition of "general insurance"). The main activity consists in pensions liquidation and payment which may be social security or welfare s assistance. The former are determined on the reports and insurance s basis funded by the levy contributions such as: retirement pension, survivors pension, disability allowance, disability pension, retirement pension according to an International Convention for work abroad. The second intervention is the implementation of which, although falling under the competence of the "welfare state", has been attributed to INPS: we are talking about the minimum pensions integration, social allowance, civilians disability. However INPS not only responsible about pensions but also it s for all benefits and income support, such as unemployment, sickness, maternity, layoffs, treatment termination and for all the other income support granted by municipalities. The INPS pays all its performance through the contributions levying and, in this context, It also provides to farms registration, employees and self-workers insurance opening domestic workers registration; it has certificative powers and it s responsible for the insurance s account statement. The Institute is also responsible for medical examinations about 9

10 disability and inability s detection; for cures and for issuing certification models of taxation. The INPDAP, National Welfare and Assistance Institute for Public Administration s Employees, is responsible for the public employees social security and it s, after the INPS, the most important institution of the Italian pension system. It s most important role consists in the liquidation and payment of pensions, premium service treatments and the end report treatment (TFR). Unlike INPS, it doesn t only hold about security. The Institute offers services such a credit institution and a social service to retired and in service public employees and their families. It gives is very articulated credit proposes. These goes by the provision of small loans to multi-year loans to employees in service and, in agreement with banks, to pensioners. Interesting It s interesting the activity aimed to state employees sons that provides scholarships and study grants, study abroad and vacations in Italy, hosting in owned houses or accredited facilities; stay in England or Ireland for English courses, stays abroad for language courses and corporate training, postgraduate Masters or PhD. This kind of performance regards approximately the third of INPDAP s activity. As we can see this institution s action is directed not only to the beneficiary of its services but is also focused on giving the family the important chances viewed above virtually at price cost. These activities make this institution one of the most popular in Italu, an excellent example of how a welfare state organization should be. INAIL, National Institute for Insurance against Accidents at Work, is pursuing several objectives: to reduce accidents, ensure that workers carry out activities at risk, ensure the reintegration into working life of injured at work. Insurance is mandatory for all employers who employ subordinate and para-subordinate workers in tasks that law identifies as risky. Protects workers by damage resulting from accidents and occupational diseases caused by work. It also exempts the employer by liability for civil damages resulting by its own employees. 10

11 The workers protection, thanks to new regulations, has taken on more characteristics of an integrated system that includes health care and economic rehabilitation and reintegration into social and working life of those who have suffered injuries as a result of professional accident or illness. Anyway INAIL not only takes care of insurance and assistance. It s very important the monitoring work that plays against the businesses in order to prevent accidents and diseases at work, in addition to the many initiatives to raise workers and companies awareness to the workplaces safety. 4. The main provision treatments There are many types of treatment benefit in Italian system. The most important pensions are: retirement, incapacity, disability, seniority, survivors' and social assignment. The retirement pension can be obtained before having reached the age for the seniority age pension. The requirements to obtain it are different between self-employed workers and subordinate workers. For subordinate workers and for those who cease to work by 30 June 2009, are required 35 years of contributions and age not less than 58 years old. Instead of the self-employed who stop by the same date are required the same years of contributions but age has to be not less than 59 years old. From the first of July 2009 will come into force a quota system under which the retirement pension will be given to whom reached a quota given by the age and contributions years (at least 35 years of contributions). Workers will be entitled to pensions regardless age if they will be paid at least 40 years of contributions. From 2013 (the year in which the quota system ends) everybody will get the retirement pension with a sum between contributions and age of at least 97 years and an age not below 61 years for subordinate employees, while for the self-employee the sum must be at least minimum 98 years and age 62. The disability pension (paid by INPS) it s for employees or self workers who suffering physical or mental infirmity. To obtain it they must not do any work and need the following 11

12 requirements: physical or mental infirmity, assessed by INPS physician, causing a complete and permanent inability to perform any work; an contribution of at least five years, three of which paid during the five years preceding the retirement s application; be insured by INPS at least five years. It is not definitive, may be subject to revision and cannot be transformed into a seniority pension. In the amount s calculation, to the accrued contributions weeks, can be added a bonus for the period missing after the date of retirement up to 55 years of age for women and 60 for men. The bonus, however, must not exceed 40 years' contributions. The disability pension is an allowance that for subordinate employees and self-workers suffering from a physical or mental disease having certain requirements. The physical or mental illness must be established an medical INPS physician and has to cause a permanent working capacity s reduction by at least one third in occupations suited to worker s ability. These must have retirement contribute amount at least five years, including at least three paid in the five years preceding the application for retirement; they have to be insured by INPS for at least five years. The allowance for ordinary disability, initially is not definitive: it applies to a maximum of three years and is renewable at recipient s request. These are subjected to a medico-legal visit and assignment shall become final after three consecutive confirmations. The ordinary disability allowance is granted if you continue working. In this case, the holder shall be submitted every year to a medico-legal visit. Unlike the disability pension, the grant can be converted into retirement upon the completion of the retirement age. Old-age pension is grant when workers reach certain limits of age, minimum contribution and has ceased to work. The last requirement does not apply to the self-employed workers who are free to continue their activities even during retirement. As for age men must be at least 65 years old and women at least 60. Women can continue working up to 65 years old until reaching 40 years of contributions. 12

13 The different pensionable age is a peculiarity of the Italian system. In fact there isn t a levelling of retirement age, but women's retirement upon the completion of 65 years of age is conceived as exceptional. This creates, in the words of many, an unjustified discrimination that is reflected on institutions account capacity. For some time in Italy there is a considerable debate about increase or not the retirement age for women and it goes towards levelling out this requirement. For both sexes are required at least twenty years of contributions while just fifteen recipients of the transitional arrangements in force until The survivors pension is the treatment grant to a dead worker s family. May be 2 types treatments: when the worker was already on board to death is called reversibiltà (literally: reversibility): is called indiretta (indirect) if the worker at the time of his death accumulated at least fifteen years of contributions, or whether he was insured for at least five years, including at least three paid in the five years preceding the date of death. This treatment belongs to: the spouse, although if separated or divorced but not remarried; the sons who are under-age at parent s death time, and for dependent students or disabled; to the deceased relative s under age dependents grandchildren. The pension s amount depends on whether there are children and spouses, and can not exceed the amount that was for the deceased to the extent of 60% to spouse and 20% or 40% to each child depending on whether or not contribute with spouse. In the absence of these their parents also have right or, if there are, the unmarried or single brothers and sisters. It is important to emphasize that the spouse s reversibilità treatment has a lifetime duration and has to be grant irrespective of the marriage s duration age difference between spouses. This fact can create large problem system especially when the recipient spouse is much younger than the deceased. These considerations prompted many European jurisdictions to put the minimum marriage s duration and an age-difference limit to have the benefit. Even in Italy there are proposals like the ones just shown but nothing was done till now. 13

14 The social allowance is a social security benefit paid to over 65 years old, who resides in Italy and have an income equal to zero or a low one. The maximum income above which the allowance is not granted is euro if the recipient is 10, euro and if it is conjugate. Are equivalent to Italian citizens, political refugees of European citizens who have worked in Italy, the third-country nationals who obtained a residence permit and citizens of the Republic of San Marino. The amount changes year by year and for 2008 was of about 400 euro. The check is not reversible and therefore can not be passed on to surviving family. Those who receive the social allowance may be entitled, under certain conditions, to social increases. The picture just traced isn t the exhaustive list of treatments provided by Italian social security system, but those shown here are the most important both for what concerns the weight that have on the country s welfare s found, both for their importance in the Italian economic and social tissue. The whole system described is based State s contribution funded by contributions. Contributions are payments that workers should do to provide the necessary means to the future retirement. The security system for employees, is funded through a levy contribution, related, for most categories, to the real wage and, for others, to conventional wage. The contribution is by definition "compulsory", regardless of any agreement between the parties. The contributions are calculated as a percentage on earnings: a part is given fy the factory and a part worker. The remuneration is made up of all that the worker receives in money or in kind before any deduction. However, some items are excluded from earnings and are not subject to contribution, for example, the household, the budget spent for scholarships, the nursery schools and colonies, or employees family members benefits. These contributions are calculated on the employee s gross earnings. In the most part of the cases, the overall percentage is 33%. The remuneration to be used for the contributions calculation shall 14

15 not be less than the minimum wage established by laws, regulations, national collective agreements. In this way, no contributions may be paid below certain annual limits established by law; the so-called minimal changes year by year according to the inflation s indices. As for selfemployed workers, in general, they have to pay contributions by themselves and the payment is made on the basis of factory s previous year sales figures. The self-employed have a slightly different system for which such payments are paid by those in competition with their occasional customers. The rates for these categories will vary depending on the type of work and are between 17% and 24.72%. A different scheme is planned for artisans, traders and self-employed farmers. 5. Social safety treatments Social safety nets are those benefits and income support for workers who, for various reasons, find themselves in difficulty. Among the most important, here is interesting to analyze the layoffs the ordinary and extraordinary gains (called Cassa integrazione guadagni ordinaria and straordinaria), unemployment benefits and (ordinary and extraordinary) and the mobility benefits. The Cassa Integrazione ordinaria (ordinary) is a routine for enterprises in difficulty and its workers in case of suspension or production s reduction due to temporary events not attributable to the contractor or to the workers. This measure is practically a grant to workers replacing their wage. This gain is up to workers, employees and managers of industrial companies in general, to the industrial and construction s and stone s craft, except their apprentices. The wage is equal to 80% of total compensation that would be it for hours not worked. The integration lasts for a maximum period of three continuous months for each production unit, as a plant, department or sector and not as an autonomous enterprise as a whole. The period may be extended in exceptional cases, up to a maximum of twelve months. 15

16 Reached that limit, before submitting a new application, the company must resume its operation for at least 52 weeks. When they have been for a not consecutive period, the maximum period of entitlement is 52 weeks in two years. There are wages limits monthly established year by law. For 2008 the limits were: per month for employees whose remuneration, including the 13th monthly and any other additional monthly (such as the 14th monthly or production s premiums) was equal to or less than gross monthly; per month for workers whose wave was more than 1857,48 gross per month. The amounts shown had a deduction equal to 5.84%. These periods are useful pension s seniority and for contributions. The Cassa integrazione straordinaria (extraordinary) differs from the one just explained because it is for most categories of workers and because it can be used in other cases. May be required if the company is in a state of renovation, conversion, crisis, reorganization or it s under insolvency proceedings. The integration is up to workers, employees and managers of: industries (including construction enterprises), contractors for canteen s services or catering and cleaning services (such businesses must be no more than 15 employees in the six months preceding the application s submission). It s also up to workers, employees and managers of: commercial, shipping and transport enterprises, travel agencies and tour operators which occupy more than 50 employees, excluding apprentices and employed under training contract; surveillance s enterprises with more than 15 employees; airlines. These workers must have service seniority not less than ninety days. As for the benefit s amount it s equal to the one seen above. The length is different: the integration is payable for a maximum of twelve months in case of corporate crisis; eighteen in the case of executive insolvency proceedings and twenty-four in the event of reorganization, restructuring and corporate changeover. Overall, the ordinary and extraordinary measures may not exceed 36 months in five years. 16

17 The unemployment allowance is the ordinary benefit given to workers who are insured against unemployment, which have been laid off than those who were suspended from businesses affected by temporary events beyond workers or the employers control (e.g. orders lack or a market crisis). Employees who resign voluntarily, unless there is just cause for resignation, will not have this allowance. To achieve it workers must be insured to INPS by at least two years and have reached at least 52 weekly contributions in the two years preceding the employment s termination date. The treatment lasts eight months that became twelve if the worker is over fifty years old. The amount is equal to 60% of monthly gross earnings for the first 6 months, 50% for the seventh and eighth months and 40% for the months ahead. For the suspended workers are paid as much as 50% of salary. This treatment ends when the employee has received all the compensation, is initiating a new job, is a direct pension s recipient or is deleted from unemployment s list. The unemployment allowance may be provided with less stringent requirements for those who have done short and discontinuous works (such as school s staff unstable workers), and so couldn t reach the minimum contribution required to obtain unemployment benefits with the normal requirements. However, these persons must have worked for at least 78 days in the previous year, including holidays and compensated absentee days. Furthermore, worker must be insured for at least two years and must have at least a week of contribution before the two years preceding the application. The duration of compensation it is usually for a number of days equal to those actually worked in the previous year and for a maximum of 180 days. The amount is equal to 35% of the average daily wage for the first 120 days and 40% for the following days. The end of unemployment with the reduced requirements is to compensate the non-employment periods that have occurred in the year prior to application. The mobility s benefit is an unemployment benefit for those who lost their jobs as a result of dismissal, and that is entered in the lists of mobility. The mobility allowance is equal, for the 17

18 first 12 months, to 100% of the cassa integrazione straordinaria s treatment perceived or that would be perceived in the period immediately preceding the dismissal, keeping the maximum monthly amount. For subsequent periods it s equal to 80% of that amount. In any case, the mobility allowance cannot exceed a maximum monthly amount determined year by year. The allowance is paid directly to the employee each month by the INPS and is suspended when the payee find a fixed-term or a part-time contract. Mobility s years are considered as covered by the so called figurative-contributions and are therefore useful for the access to pension benefits. The allowance is up to all employees discharged by industrial enterprises which employ more than fifteen employees, or commercial enterprises which employ more than fifty persons. This provision has a duration longer than the other unemployment treatments (e.g. the Cassa integrazione). It should not be underestimated the fact that, by providing some special benefit for enterprises which want to recruit workers from registered mobile workers list (such as: reductions in social security contributions and loans to businesses) is facilitated the relocation of workers from company to another. The law on collective redundancies, enshrines of first-refusal (for 6 months),the mobility workers right to be recruited by the same employer who, past the crisis period, needs to hire new workers. In other words, the company must give priority to their former employees still enrolled in the mobility lists who meanwhile didn t find another job. 6. Conclusions Now seems appropriate to speak about what was said above in terms of system s sustainability, adequacy and modernization. As for sustainability must be done an important premise: as you know, pensions are paid through workers and businesses contributions. In this way, if the system is well organized and 18

19 everybody pays their contributions, sustainability should be ensured. But Italy must to cohabit with two great economic and social problems that pose a risk to system s keeping: tax evasion and undeclared work. As regards the second aspect, the problem involves both the State and workers. In fact it could happen that a worker who has worked in black (that means without any job contract and so without paying any contribution) up to retirement age receives only the social pension and the State shall disburse it didn t receiving anything from his work. Moreover, the black worker is not insured by INAIL and this involves a huge cost burden for the state and the worker himself in the event of accident or illness at work (because the in Italy State must provide free healthcare to everybody). Another dramatic problem in Italy is the enormous public debt that doesn t allow the institutions to increase pensions till decent levels. Is not to be forgotten that 70 s and 80 s were made very serious mistakes for the Italian social security system. For example, pensions were paid to people who had just twenty years of seniority contributions (these were the infamous baby pensions ); the amount of the subsidy followed the real inflation; there was an excessive use of Cassa integrazione and mobility. But perhaps the biggest mistake was the lack of separation between care and welfare: the social security institutions should load into their budget expenditure for social security measures that are not paid by foreign entry, creating debts or losses. These allowances abroad are often provided by separate establishments, and loaded on general taxation. Only since 2004 it s expected that the security s burden has to be evidenced by separate accounting posed in the social security institutions budgets in order to properly allocate the public contribution to the care s burden. As for the adequacy, Italian system provides a wide range of benefits, in line with many European countries. But benefits variety doesn t mean adequacy. In other words, there are may 19

20 benefits but the amounts paid are often totally inadequate and not fit for purpose for which they are issued. This situation is made by the problems mentioned above and covers all services provided. Pensions, allowances and the various treatments are among the lowest in Europe. Perhaps a solution would be to eliminate those procedures that disperse public money paying derisory sums, reinvesting that money in less but more decent benefits, that would certainly be more useful to the citizen. As for the system s modernization, although Italy lags behind its European partners, is taking decisive steps forward. One example was the reform that made possible for workers to invest their severance payments in pension funds managed by banks, insurance and postal services. These funds should ensure a pension s integration received through the revenue earned, which would enable the employee to have a higher income. In pursuit of modernization would be desirable that the retirement age would be treated as in the rest of Europe; another help can arrive by a strong policy against tax evasion and black work. Once this will be done, State will have many more resources for social security and could certainly provide the best performance. Antonio Costa University of Bologna 20