19 Jan 2009

Measuring the Sustainability of Pension Systems through a Microsimulation Model

The Case of Italy

Flavia Coda Moscarola

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European Network of Economic Policy Research Institutes (ENEPRI) Research Report No. 66 / 20 pages

Many countries have recently enacted radical reforms to their pension systems to recover long-term financial sustainability. One measure has been to introduce an actuarially fair pension rule. A system that grants actuarially fair benefits is not only fair across individuals and generations, i.e. it grants equality of treatment, but is also sustainable in the long run. In this paper, we take Italy as a case study and use a microsimulation model – an instrument able to monitor actuarial fairness of the pension rules in a less conventional approach – to analyse the phasing-in of the reforms and their ability to recover the long-term sustainability of the system.