Abstract
We evaluate recent reforms of Italian social security with respect to both the (long) transition and the new steady state, as defined by the notional defined contribution formula. The first is hardly sustainable in the face of the projected sharp increase in the dependency ratio. The second is hardly compatible with a good allocation of risks, given the preponderance of the pay-as-you-go (PAYG) component. We believe that further reforms will have to be enacted within PAYG (with a correction to "seniority pensions") and beyond PAYG, with the introduction of an opting-out clause directed at readjusting the relative weights of the two components in households' retirement wealth. The opting-out clause could be combined with TFR (severance pay) diversion, which in itself appears insufficient to realize such an adjustment. Recent government proposals (2001) are briefly discussed.