Structural fiscal shock: the alarm on the financial risk of demographic aging

In Italy the average number of children per woman has fallen to 1.14, while life expectancy at birth has reached 81.7 years for men and 85.7 for women. As of 1 January 2025, those over 65 represented double the number (24.7%) of those under 15 (11.9%); this translates into the highest percentage of elderly people in the European Union, compared to the lowest percentage of children.

It is in this scenario that EFPA Italia, a Foundation affiliated to the European Financial Planning Association, which certifies professionals and training courses in the investment consultancy sector, explored with Massimiliano Marzo - member of the Scientific Committee of EFPA Italia, economist of the University of Bologna and director of the Master in Wealth Management of Bologna Business School, specialized in pensions, financial markets and risk management - the economic implications of longevity.

The concept at the center of Professor Marzo's analysis is longevity risk: not the fact of living longer, but the possibility that life expectancy increases more rapidly than the ability to finance it. For the economist, this is the most serious risk to face, yet it remains in the background of public debate. “Unlike a financial crisis or an inflationary shock, population aging advances slowly and generates less sense of urgency,” he notes. A second factor, he adds, is the complexity of the phenomenon: it concerns pensions, healthcare, the labor market and individual savings together, and for this reason it tends to be postponed.

One of the most frequent mistakes in individual planning, in fact, is thinking only about average life. “An underestimation of this risk can lead to excess consumption in the first years of retirement, without being able to adequately support health and welfare expenses,” explains Marzo.

The demographic data highlight how the median age, equal to 49.1 years, is well above the EU average (44.9). A gap that Marzo defines as the most worrying: "A society can support a very long-lived population if it has a sufficiently large base of people of working age and high levels of productivity."

For pay-as-you-go pension systems like the Italian one - financed by the contributions of active workers - the balance becomes increasingly difficult to maintain. March speaks in this regard of a "structural fiscal shock": unlike a recession, which produces temporary effects on public finances, demographic aging permanently changes the ratio between the active and inactive population, steadily increasing the demand for pensions, healthcare and assistance.

For March, the response at an individual level starts from a change of perspective: planning not on the average lifespan, but on the concrete possibility of living longer. It means starting to save for retirement early enough, using complementary pension tools, maintaining a consistent asset allocation with a long horizon even after retirement, and avoiding consuming capital too quickly in the first years.

“Don't plan your financial future by thinking about average life,” summarizes Marzo. “Plan it with the possibility of living much longer than average in mind.”