Pensions: massive cut to index-linked increases. New ‘Quota 100’ scheme worth 2.5 billion

The cut to pension indexation is substantial, commensurate with the inflation outlook suggested by the +5.4 per cent figure indicated yesterday in Istat’s preliminary estimate. And it serves to strengthen a funding structure that rests on the equally robust pillar of fiscal discipline aimed at banks, insurance companies and energy firms. But the public administration must also pay the price on the altar of the budget, with a new 25 per cent cap on staff turnover being imposed for next year. Meanwhile, magistrates and university professors are seeing the ‘weighted average’ criterion enshrined in law to reduce the impact of their pay rises, compounded by the ‘simple average’ applied to judges following administrative court rulings.

After nearly three days of hard work on regulations and figures, the finalised text of the Budget Bill has reached the Quirinale, which has authorised its submission to Parliament. In their main points, the 157 articles of the budget confirm the previews from the previous day. But as is always the case with the most important piece of legislation of the year, it is a careful reading of the final texts that reveals the true significance of the measures.

One measure that stands out, amongst others, is the cut to pension indexation – that is, the mechanism that links the value of pension payments to inflation. This latest drastic cut mirrors the approach taken three years ago, during the last bout of high inflation. The mechanism does not operate on a income-bracket basis, but, as on the previous occasion, reduces the indexation across the entire pension depending on the amount of the payment. Once again, only pensions up to four times the minimum – that is, up to €2,479.20 gross per month – will keep pace with rising prices.

It should be noted that the vast majority of Italian pensions fall within this threshold. But above it, the problems begin, and they increase as the value of the pension rises. For pensions between four and five times the minimum, the indexation rate is 85 per cent, but it then falls rapidly to 53 per cent in the bracket between five and six times the minimum, before plummeting to 32 per cent for pensions more than ten times the minimum. For the highest pensions, therefore, the reduction in the indexation rate is 68 per cent.

The restrictions placed on this social security expenditure will also serve to fund the early retirement flexibility scheme, which the Lega is calling for to be allocated to the new ‘Quota 100’ scheme. The provision amounts to 2.55 billion over the three-year period, as the 850 million announced so far will be repeated in each of the next three years. This is a significant sum, which is likely to further fuel the debate between the Lega and those – starting with FdI – who are calling for it to be used to increase minimum pensions rather than for early retirement.