A piggy bank that’s not just for retirement savings but also for education

The proposal, included by the government in the draft Budget Bill, to open a ‘pension savings account’ from birth – initially funded by a state contribution and subsequently, on a voluntary basis, by family members who benefit from tax relief – has certain merits that are rather rare in the landscape of our country’s policies. It benefits newborns at a time when very few children are being born. It contributes to pension savings, and thus helps to breathe new life into our pension system, which has been thrown out of balance by an ageing population. It represents a long-term measure, unlike the many short-term measures, generally dictated by political expediency.

In many respects, however, the proposal could be improved. For this reason, it is useful to understand what has been done elsewhere. The closest example has been implemented in Trentino-Alto Adige/Südtirol: from 2025, the region will provide a contribution towards the enrolment of newborns in a supplementary pension scheme. The scheme is simple: an initial payment of 300 euros, followed by 200 euros a year for four years, provided the family makes a supplementary contribution of at least 100 euros each year. The scheme has proved more successful than expected. In the first six months, around 40 per cent of the potentially eligible population had signed up, prompting the region to increase its funding.

This template offers two useful pointers. The first concerns the division of responsibilities. ‘Pensplan’, the regional public company, manages the scheme from an administrative perspective, but not the assets: households are free to choose the pension fund into which to pay their contributions. It is a distinction that would be worth maintaining at national level as well. In the government’s proposal, financial management is currently delegated to CDP, whilst it would be advisable to broaden the range of managers, leaving households free to choose.

The second concerns the possibility that the fund could be financed through a co-funding mechanism in which the public sector’s contribution depends on that of the private sector. This system offers the dual advantage of creating a multiplier effect on savings and of involving households and beneficiaries in decision-making, encouraging them to think about the long term as well. This mechanism could be reintroduced, perhaps with special incentives for less well-off families, who would otherwise be unable to benefit from it.

Finally, one aspect that has not been implemented in Trentino-Alto Adige, but which deserves attention, concerns the possibility of allocating these savings towards education costs as well. The potential use of savings for educational purposes could contribute to young people’s well-being and the sustainability of the public budget at least as much as it does to the pension system. Indeed, a sum used at the age of twenty to fund a university degree, a master’s degree, a vocational course or a period of study abroad can increase one’s income throughout one’s lifetime. A higher income also means higher contributions and, in the long run, a higher pension, with an indirect pension return greater than that obtained by leaving the savings entirely tied up until old age. Furthermore, the greater flexibility may act as an incentive for families to set aside funds in this savings pot.

Moreover, the idea of using long-term savings for education has already been successfully trialled in various contexts. In the United States, Children’s Savings Accounts are widespread; these are accounts intended for children’s education, in which family savings are often supplemented by external contributions. In Italy, the ‘Will – Educare al Futuro’ project, aimed at economically vulnerable families between 2019 and 2023, provided that savings of up to one thousand euros would be quadrupled if used for educational expenses. A randomised evaluation involving 576 families showed not only that almost all of them managed to save – on average around 700 euros – but also that there were positive effects on educational aspirations and academic outcomes, particularly among low-income households.

It may therefore be useful to broaden our perspective, so that we no longer speak merely of a ‘pension piggy bank’, but rather of a future-oriented individual account, which can indeed contribute to the sustainability of the pension system directly, but also indirectly, through investment in human capital, perhaps even helping to revive our dismal productivity.