covip to offer an investment line that guarantees the nominal value of invested capital in order to be eligible to collect the contributions of those who have enrolled tacitly. simulations and developments in the markets show that the costs of offering a broader range of guarantees would not be prohibitive : for example, even with conservative assumptions on market volatility, a capital guarantee in real terms over a 10 - year investment horizon would cost 0. 7 per cent on a yearly basis. 17 guarantees that are conditional on particular events ( such as long - term unemployment or illness ) would imply a significantly lower cost. a low - volatility regime such as the one that has prevailed in recent years would further reduce the cost of guarantees. 18 yet another way to reduce the costs that workers attach to the shift from the tfr scheme to pension funds would be to allow them to go back to tfr if they changed their mind, although there should be limits on the exercise of such an exit option. empirical evidence shows that workers ’ choices are often backward - looking and are affected by herding behaviour. these two factors could determine excessive movements in and out of different investment vehicles and might lead to an unjustified increase in the costs borne by investors. customers should not be overloaded with difficult investment choices : the timing and size of contributions and the allocation of assets could be fixed by default rules, allowing a limited menu of options ; life - cycle products should be developed to allow portfolio rebalances in line with the changing risk profile of workers as they age. 19 simplicity and cost - effectiveness are crucial if we want to increase retirement savings among those who most need them. at see oecd ( 2006 ). the details of the simulation are reported in cesari, grande and panetta ( 2007 ). although the recent financial turmoil resulted in a marked increase in market volatility, in most markets and asset classes current volatility is still well below the pre - 2004 levels. see boeri et al. ( 2006 ) and merton ( 2006 ). present, enrolment is particularly low among younger workers, women, and small business employees. in 2005, the membership ratio of younger workers ( aged from 14 to 34 ) was below 8 per cent ; that of women was 11 per cent ; that of employees of small businesses ( fewer 50 employees ) was less than 5 per cent. it is also well known that adverse selection on annuity markets plays a possibly important role in limiting their development.

robust to uncertainty. they should also be resilient to the economic and political pressures that demographic changes are likely to engender. see also morcaldo ( 2007 ). see lee and carter ( 1992 ) and tuljapurkar, li and boe ( 2000 ). see cass business school ( 2005 ). as far as public pensions are concerned, the introduction of notional defined contribution ( ndc ) pension systems in a number of countries, including italy, goes in this direction. in principle, ndc systems can be designed to calculate pension benefits taking macroeconomic and demographic developments automatically into account. however, regardless of the very long transition period, the italian pension scheme, in the form it was introduced, differs in some important respects from the prototype of an ndc system. the benefit rules were not designed to be frequently and automatically updated to account for demographic developments and the rate of return on workers ’ contributions ( equal to the rate of growth of nominal gdp ) apparently does not grant the actuarial balance of the system at least in the short - to - medium run. 5 several changes have been agreed recently between the government and the social partners. while some of the new rules are in line with the ndc philosophy ( for example, parameters should be updated every three years instead of every ten and preliminary negotiations with social partners will no longer be needed ), others are more difficult to understand ( for instance, granting some categories of workers a specific pension benefit - towage ratio ). 3. demographic change and pension systems all pension systems imply a redistribution of real resources from active workers to retirees. while in payg systems this is implemented through taxes and social security contributions, in funded systems it is achieved through capital markets, as pensioners use the assets accumulated in their working years to provide for their needs once retired. 6 in both cases, the goods and services consumed by both active workers and retirees are produced by the labour of the former. in a funded system, however, saving and accumulated assets should be greater, leading in principle to a larger amount of resources available. an expected increase in longevity results in higher old age dependency ratios and narrows the range of possible changes to pension system designs, regardless of the institutional arrangements for intergenerational redistribution. possible measures include : ( i ) increasing payroll contributions ; ( ii ) reducing pension payments relative to per capita gdp ; ( iii ) raising the retirement age ; and ( iv ) increasing current saving in order to pre -