Apr 15

Retirement benefits

The Italian social security system is controlled by state agencies working under the central organization of the National Institute for Social Security (I.N.P.S.).

Most workers in the public and private sector (including European and non-E.U. citizens legally working in Italy, under international bilateral agreements currently in force) are covered by the public pension scheme, and bound to pay the social security compulsory contributions as follows:

• Employees: contributions are deducted from the employee’s salary by his or her employer, who carries out all the registration formalities with I.N.P.S. and provides for direct payment of roughly 35% of the salary. The employee’s contribution is approximately 10%. Different contribution rates are provided for depending on the employee’s category and employment sector.

• Self-employed people: they make contributions (in differing percentages) to social security funds linked to their profession (lawyers, engineers, architects, journalists), or alternatively directly to the I.N.P.S. (small businessmen, shopkeepers, smallholders).

Individuals who are not subject to compulsory insurance, unemployed people, employees who have interrupted their employment relationship or are reaching retirement age, can pay “voluntary contributions” to ensure continued cover or to reach the minimum contributions required for pension benefits.

The state pension scheme provides for:

• Old-age Pension: available after 20 years of contribution at the age of 65 for men and 60 for women (the same requirements apply to self-employed people).

• Seniority Pension: available – before full retirement age – after 35 years of contribution at the age of 58 (59 for self-employed people), or alternatively after 40 years of contribution.

• Disability Pension: employees (and self-employed people) affected by permanent physical or mental disabilities, which have led to their complete incapacity to work are entitled to this benefit subject to certain income and contribution requirements. Employees whose disabilities have led to a substantial reduction in their capacity to work (to a degree of 75%) will be entitled to receive an Invalidity Allowance.

• Survivors’ Pension: upon the death of a worker, certain members of his family (his spouse and/or children) are entitled to a percentage of his old-age pension.

• Social Allowance: available to citizens (from the age of 65) with no income who are not covered by Social Insurance.

The pension system was revised by Law No. 335/1995, which introduced new criteria for quantifying the pension benefit.

The previously applied “earnings-related system”, whereby the pension was calculated on the basis of a percentage of the employee’s average salary over the last 10 to 15 years of his work activity, was replaced by the “contributions-based system”, whereby the pension is calculated on the basis of the social security contributions paid by the employee over the whole of his working life (for people having less than 18 years of contributions on 31st of December 1995, a “mixed system” is applied).

• “earnings-related system”: provides for access to pension benefit after at least 20 years of contributions from the age of 65 for men and 60 for women.

• “contributions-based system”: provides for access to pension benefit with fewer years of contributions and at a younger age (in general this system will give raise to lower pensions and so workers should make provision for a supplementary pension).

New pension schemes were introduced by Law No. 243/2004 and Law No. 247/2007 with the aim of meeting those objectives widely agreed upon by European countries, including:

• promoting complementary forms of private social security insurance in addition to the public social security system;

• introducing economic incentives for employees who choose to delay retirement;

• gradually raising the retirement age, mainly through liberalization on a voluntary basis.

Law No. 133/2008 introduced new rules on combining income received from pension benefit and employment.

Discussions are currently being held in Parliament in relation to the implementation of the European Directive on equal pension treatment for men and women in Italy.