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Contributory, remunerative, capitalisation, distribution

Very quickly, I have to get there before the snow (expected for tonight).

From some comments on the previous post, and from some regurgitations from the black sewer, I sense that a significant majority of Italians live in a misunderstanding: that according to which the transition to the contributory system (Dini reform, for friends law 335 of 1995 ) would have made the more sustainable pension system because everyone would finance their own pension with the contributions they pay.

In other words, many confuse the contributory calculation method with the adoption of a funded system .

Unfortunately (and obviously) this is not the case, and since they wanted not to let you understand it (otherwise you would have understood it) and therefore it will not be easy for you to believe me, by screening a film already seen with the euro I will immediately provide you with the auctoritas of a true economist, prof. Brunetta, currently president of CNEL, who in his hearing to the Commission that I am honored to chair specified the following:

(you can find the report here ). The change in the calculation method (anchored to the contributions paid rather than to the last salaries received) does not imply a change in the financing system, and God forbid! If we had moved from a pay-as-you-go system to a funded system like this, "de bbotto", it would have been a tragedy, because obviously entire cohorts of pensioners would have been left without pensions. How come? But for the simple fact that the contributions of active workers, instead of financing current pensions, would have gone, like new gold coins, into the field of financial miracles , where they would have multiplied (except for the Lehman crisis…) while waiting to finance future pensions.

The same euro cannot be simultaneously given to a pensioner and invested somewhere!

Put bluntly (don't blame me), the transition from remunerative to contributory does not mean the transition to a system that is self-financing and can therefore relatively not care about demographics and growth. The money always comes from the contributions of current active workers, but with contributions you can pay current pensioners a little less.

And future ones?

Without economic and demographic growth, as you will have heard me say several times, neither the remuneration nor the contributory methods offer guarantees of sustainability. Both methods apply to a pay-as-you-go system, that is, they are based on the fact that there is someone who is paying the contributions (not: has paid them. Is paying them!).

And to pay contributions you have to be born, you have to work, and you have to earn.

Three things which, after austerity, have all become more difficult, especially the last one, for the reasons summarized by the well-known graph:

Having cleared up the misunderstanding, when I can I will return to some interesting comments on the previous post, acknowledging Anto and Alberto49 for having raised certain issues in unsuspecting times , when I would never have thought of having to deal with pensions for work.

This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2024/01/contributivo-retributivo.html on Fri, 19 Jan 2024 15:57:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.