Article: The shift to the defined contribution pension scheme: an Italian case Journal: International Journal of Sustainable Economy (IJSE) 2017 Vol.9 No.1 pp.72 - 86 Abstract: Many countries are facing up to the problem of the financial sustainability of their pension systems by the transition from the defined benefit scheme to the defined contribution one. However, the defined contribution formula alone does not guarantee sustainability. There are many economic, financial and demographic factors to be taken into consideration, the first of which being the rate of return to be paid on contributions and benefits. This article deals with the shift to the defined contribution scheme in contexts of economic and demographic instability, in which the steady state does not occur substantially, with reference to one of the largest Italian statutory pension systems for professional workers. We propose a new way to structure and manage a pension system on the basis of a general principle, we also provide a proper rule for the rate of return on the pension liability as well as a pension indexation rule differentiated for both defined contribution and defined benefit pensions in order to improve intergenerational equity. Inderscience Publishers - linking academia, business and industry through research

Title: The shift to the defined contribution pension scheme: an Italian case

Authors: Massimo Angrisani; Giovanni Di Nella; Cinzia Di Palo

Addresses: Department of Methods and Models for Economics, Territory and Finance, Sapienza University of Rome, Italy ' Department of Economics and Law, University of Cassino and Southern Lazio, Via Sant'Angelo, 03043, Cassino, Italy ' Department of Economics and Law, University of Cassino and Southern Lazio, Via Sant'Angelo, 03043, Cassino, Italy

Abstract: Many countries are facing up to the problem of the financial sustainability of their pension systems by the transition from the defined benefit scheme to the defined contribution one. However, the defined contribution formula alone does not guarantee sustainability. There are many economic, financial and demographic factors to be taken into consideration, the first of which being the rate of return to be paid on contributions and benefits. This article deals with the shift to the defined contribution scheme in contexts of economic and demographic instability, in which the steady state does not occur substantially, with reference to one of the largest Italian statutory pension systems for professional workers. We propose a new way to structure and manage a pension system on the basis of a general principle, we also provide a proper rule for the rate of return on the pension liability as well as a pension indexation rule differentiated for both defined contribution and defined benefit pensions in order to improve intergenerational equity.

Keywords: defined contribution pension scheme; financial sustainability; intergenerational equity; pensions indexation rule; Italy; pensions sustainability; rate of return; economic instability; demographic instability; pension liability.

DOI: 10.1504/IJSE.2017.080858

International Journal of Sustainable Economy, 2017 Vol.9 No.1, pp.72 - 86

Received: 04 Feb 2016
Accepted: 03 May 2016
Published online: 09 Dec 2016 *

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Title: The shift to the defined contribution pension scheme: an Italian case

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