MNI: Italy Eyes Move To Reduce Early Retirement - Sources

The Italian government is considering a reform of its state pension system which would end the provision of one-year temporary payment schemes allowing early retirement before the official age of 67 as of next year, sources close to the matter told MNI.

While the executive led by Giorgia Meloni has already made clear it will not freeze the retirement age, which is set to rise by three months following an automatic adjustment linked to life expectancy, fiscal constraints and high public debt limit the scope of any reform, with implications for Italy’s finances well beyond 2026. Different estimates are circulating within the government on how much potential changes could cost and how they would affect the debt-to-GDP ratio over the longer term, sources said.

“There is a common understanding between [Finance Minister Giancarlo] Giorgetti and Meloni that any changes can’t be allowed to scare the markets,” one source said.

Among the internal calculations, one estimate puts the cost of freezing the retirement age at EUR2 billion in 2026, effectively setting a threshold for the scope of reforms.

“The problem for the freeze was not next year, it was the cumulative burden for the state,” the source insisted, noting that repeated freezes would not be sustainable given demographic pressures.

Without reform, pension spending is projected to rise further, reaching 15.7% of GDP in 2030 and 17.1% in 2040, when the retirement of the baby boomer generation is fully felt, according to official data. (See MNI: Italy To Use Extra Revenue To Lower Deficit Below 3% GDP)

LIMITS TO EARLY RETIREMENT

Meloni’s reform is expected to maintain some room for early retirement at 64, but eligibility would be tied to a long history of contributions. The government is also weighing the use of workers’ severance savings to help finance earlier exits, while continuing to incentivise employment beyond 67, sources said.

Despite resorting to temporary one-year measures, Italy has managed to reduce early retirements in recent years, with a 9% drop in 2024 and another 11% decline projected for 2025. (See MNI: Italy Looks For Ways To Spend NGEU Money -Officials)