The redistributive features of Italian Pension System: The importance of being neutral

The study investigates the redistributive features of the pension system currently in rule in Italy, which is a mix of a phasing out PAYG regime, inspired by a strong progressive principle, and a new defined contribution one inspired by actuarial fairness. Is the PAYG quota really progressive? This is a crucial question, since in the affirmative case the transition to neutrality would imply a first round effect towards higher pension earnings inequality. The answer however is not obvious, since there are also several work career features affecting redistribution. Building on a baseline population made up of a long panel of work careers, that we simulate backward up to labour market entry and forward up to retirement end, we are able to show that, a bit surprisingly, the current system is regressive: it redistributes from poor to rich. A second evidence is the relevance of pension updating rules: although seldom discussed in the policy debate, they have a large role in the redistributive features of the system.