Impact of Population Ageing on the Italian Pension Expenditure

The longevity improvements and low fertility rates experienced in Italy in the last decades are a largely acknowledged phenomenon. As a consequence, the Italian population experiences, and will experience in the long term, cohorts of elderly that are increasing in size and younger cohorts of active people that are declining. Hence, the population ageing, featured by a low time progression but persistent, considerably threatens, and will threaten over the next decades, the viability of the Italian public pension system that is pay-as-you-go financed. This paper aims to assess the implications of the population ageing on the sustainability of the Italian public pension scheme in the light of the demographic and economic projections provided by the 2018 Ageing Report for years 2016-2070, published by the European Commission in May 2018. Specifically, the level of the pension expenditure, measured as the ratio between the pension expenditure to the GDP, and its decomposition in the product of some specific factors - first of all the old-age dependency ratio or the benefit ratio - are analyzed.