The Italian Pension Gap: a Stochastic Optimal Control Approach

Alessandro Milazzo () and Elena Vigna ()
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Alessandro Milazzo: Imperial College, London
Elena Vigna: University of Turin and CERP-Collegio Carlo Alberto

No 179, CeRP Working Papers from Center for Research on Pensions and Welfare Policies, Turin (Italy)

Abstract: We study the gap between the state pension provided by the Italian pension system pre-Dini reform and post-Dini reform. The goal is to fill the gap between the old and the new pension by joining a defi ned contribution pension scheme and adopting an optimal investment strategy that is target-based. We fi nd that it is possible to cover, at least partially, this gap with the additional income of the pension scheme, especially in the presence of late retirement and in the presence of stagnant career. Workers with dynamic career and workers who retire early are those who are most penalised by the reform. Results are intuitive and in line with previous studies on the subject.

Pages: 30 pages
Date: 2018-05
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