These provisions are likely to intensify inter-generational conflict. Current workers, in particular younger ones, will not receive retirement benefits comparable with those of their predecessors. Nevertheless, those still in the workforce will still have to pay 30% of their wages to finance current pensioners. Under such circumstances, the increase in the taxation of investment income, coupled with the pressure to invest in government bonds to finance burgeoning public debt, may be regarded as unjust.
After all, it is well known that problems arising from the lack of economic growth in recent years result from the burden of public debt and suffocating taxation that affects goods, services and labour costs.
Another noteworthy reform concerns the evolution of the so-called TFR (Trattamento di Fine Rapporto), a form of severance pay that in the past provided lump-sum cash payments upon job termination. Since 2007, employees can direct their annual TFR accruals to be paid as a contribution to a DC pension fund, or recorded by the company in its TFR book reserve. In the first case, when employees leave the company, they will receive a benefit that is equivalent to all TFR contributions paid, plus the return generated by the pension fund through the management of its assets. The tax rate at termination is favourable for employees, with rates from 15% to 9% on the basis of the length of enrolment in the pension fund.
The 2015 stability law has introduced, for a trial period running from April 2015 to June 2018, the possibility for private sector employees to receive the TFR in advance, together with their wages. Through this option, if the employee decides to receive his TFR accrual with the monthly salary, it will be taxed as part of regular income. This will prove detrimental for both pension funds and for pensioners. Pension funds may lose contributions, and employees will see a reduction in their total pension benefits, thereby endangering their future financial security at retirement. While it may be useful to have more liquidity in times of economic crisis, this measure will certainly not help the further development of supplementary pensions.