The INPS hole of 61 billion

  • March, 2025
  • Blog

The news coming from INPS is alarming: The Italian National Institute of Social Security has a hole of 61 billion, a figure never reached before. The causes are multiple, obvious and interrelated: the average age in Italy is constantly growing, families are having fewer and fewer children and this is forcing the country to constantly raise the retirement age and an increase in taxes to cover the shortfalls that arise.
The critical threshold calculated to ensure that pension expenditure is covered by working taxpayers compared to pensioners is a ratio of 1,5 (i.e., the country must have at least 1,5 workers for every elderly person): Italy is currently at 1,4 and is expected to drop to 1,3 by 2030. Furthermore, it should be considered that INPS does not limit itself to paying pension contributions, but also takes care of disability pensions, welfare pensions, income assistance. (for example the inclusion income), maternity benefits.

The consequences of the INPS crisis

It is a situation that forces the State, every year, to cover the INPS expenses, which, for the reasons stated above, spends more than it takes in. In 2024, an increase in public spending to cover the INPS shortfall is expected to be equal to another 24 billion. An alarming figure, if one considers that already 23% of the taxes paid by Italian taxpayers are allocated to social security, a percentage that in reality is destined to increase further since the State is forced every year to cover a shortfall that continues to inexorably grow. The elderly are increasing, the young are decreasing, pension expenditure is rising, and there do not seem to be any solutions capable of stopping this trend. The future scenario is therefore not rosy at all.

The need for private pension provision

Consequently, in Italy there is increasing talk of the need to create private pension schemes as an alternative to public contributions; However, this is not always possible because the average savings of Italian citizens are not high enough to allow for such a solution. However, this is not simply an inevitable consequence, against which it is not possible to make corrections. The increase in the average age is a determining factor in causing this shortfall, and indeed, precisely for this reason, It would be a duty for the State to improve its wealth planning, in order to correct or at least limit this trend. For decades now, Italy has aimed to adopt short-term strategies that prove to be mere palliatives and never cures, with the result that we simply postpone the problem further, only to find it more serious than before.

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In Conclusion: The Lesson of Norway

There are states that have been able to devise solutions capable of reversing this type of trend, in a fairly simple way. It comes to our aid the example of Norway, which has long since established a sovereign wealth fund in which state profits are invested. A fund that, in 2023, yielded 11,07%, which in 2024 is recording 9% and which in the last 15 years has recorded a +8,24% performance. The result is that the aforementioned fund has gone from the initial 23 billion dollars to the current 1152 billion.
Profits that, clearly, can then be reinvested to cover any shortfalls in public spending such as contributions, thus avoiding both the need to increase the retirement age and the burden of covering the holes in the pension system through an inevitable increase in taxation.
The foresight of the Norwegian government should demonstrate how a state, just like any company or entrepreneur, must put economic and capital planning, diversification and the need to adopt solutions to solve problems at the top of its priorities., rather than simply trying to prevent them from getting worse. A strategic approach that applies to private individuals, entrepreneurs and even states.

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