By Giuseppe Fonte and Gavin Jones
ROME (Reuters) - Italy is preparing to reform its pension system again to make it more flexible for those who want to leave work early, officials say, and the changes may include ending ahead of time a costly but underused 2018 plan that lowered the minimum retirement age.
With a steadily growing army of retirees, pensions in Italy are a national obsession and one of the most frequently debated topics on television talk shows.
Under the 2018 "quota 100" plan, people can draw a pension if they have paid in 38 years of contributions as long as they are 62 years old - the sum of the two figures giving the "100" of the plan's name.
The plan was budgeted to cost almost 20 billion euros ($22.2 billion) over three years until 2021, when it is due to expire. But some in the government are pushing to drop it at the end of this year to save money.
With one of the world's oldest populations, Italy spends more than 16% of national output on pensions, more than any other developed country except Greece, data from the Organisation for Economic Cooperation and Development shows.
This makes it harder for Rome to reduce its debt, which is the second highest in the European Union and drains resources from other areas. For example, Italy is near the bottom of the OECD's 35-nation league table for education spending.
"Instead of waiting for the natural end of quota 100 at the end of 2021, it would be better to have a replacement solution ready to come into force next January," Treasury undersecretary Pier Paolo Baretta of the ruling Democratic Party told Reuters.
As things stand, when quota 100 expires, retirement rules are set to automatically revert to those imposed in a highly unpopular 2011 reform that raised the retirement age to 67.
The government wants to avoid this by introducing a new system that is less generous than quota 100 but less severe than the 2011 regime, imposed by former premier Mario Monti at the height of the euro zone debt crisis.
One option being considered is to let people retire at 64 but on a reduced pension compared with what they would get if they stayed at work a few years longer, said a government source who asked not to be named.
"Pension reform is one of our top priorities," said Labour Minister Nunzia Catalfo of the co-ruling 5-Star Movement.
"We will try to find a way to help workers retire earlier, especially those with physically tough jobs," she told Reuters.
TRYING AGAIN
The new reform will be the sixth significant overhaul in recent decades. Three of the previous ones raised the retirement age, while two of them, including quota 100, reduced it.
Ending quota 100 a year early would yield significant savings, but the new system will be more expensive than going back to the 2011 reform.
The quota 100 option has proved less popular than expected, which has helped public finances. Pasquale Tridico, head of the state pensions agency INPS, told Reuters he estimated savings of 2.6 billion euros in 2020 and at least 2 billion in 2021.
Most of this money has already been earmarked for other spending measures in the budget passed by parliament last month, a Treasury official said.
Successive governments have tinkered with the system ever since the mid-1990s, when a hugely generous pension regime still allowed millions of people to retire in their 40s and 50s under what were known as "baby pensions."
Those are a thing of the past, but Italian pensioners have still fared better than workers during two decades of economic stagnation. Average pensions grew twice as much as wages between 2000 and 2015, data from national statistics bureau ISTAT shows.