Reforms and News
- The retirement age for private sector working women from 2012 will increase from 60 to 62, and then will increase to 66 from 2018
- The retirement age for all other workers will increase from 65-66
- From 2012 the contribution-based system extended to all workers
- Employees wishing to retire need to contribute for a minimum of 20 years, and the amount has to be equal to at least 1.5 times the social pension
- A safeguard clause has been introduced to ensure that the retirement age for all increases to 67 from 2021, in case the target is not automatically reached through a mechanism which links retirement age to increasing life expectancy
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A public pension pillar, voluntary occupational schemes and private pension plans form the bulk of Italy's pension system.
Public Pensions
The first pillar consists of a compulsory pay-as-you-go insurance plan comprising various branches. The most important are pension insurance for employees and for the self-employed and retirement pensions for civil servants.
The level of pension and the statutory retirement age depend on a set of complicated pension rules.
The 2004 pension reform tightened the previously very generous conditions for early retirement: the age at which employees can draw a seniority pension is currently being slowly raised from 57 years to 62 years by 2014.
Austerity measures introduced in 2012 will result in the seniority system being phased out altogether by 2018, meaning workers will not retire until 66. Men will then need to make 42 years of contributions to claim a pension, and women 41.
Occupational Pensions
Due to the previously generous first pillar system, additional occupational pension schemes are not widespread in Italy. Just over 5 million people had private pension plans in 2010, 22% of the working population.
1. Pension Funds
In Italy there are two types of pension funds:
- Closed or contractual pension funds which are implemented either as company pension funds by a single company or as industry-wide pension funds set up by the employers' association and the trade unions for a specific group of participants;
- Open pension funds that are offered by banks, insurance companies or investment management companies for a generic group of participants, i.e. the self-employed.
All pension funds have to sign an agreement with an external investment manager that can only be an insurance company, a bank or a registered asset management company ('Societa Gestione Risparmio' or SGR).
Today, all pension funds now operate on a defined contribution (DC) basis, as this is the only permitted type of pension plan. Defined benefit (DB) plans are restricted to pre-existing funds. There are no minimum funding requirements.
2. Termination indemnity payments (TFR)
Upon termination of employment for any reason, employers have to pay a termination indemnity ('Trattamento di fine Rapporto' or TFR) to all employees. In Italy the TFR serves as a backup in the event of redundancy or as an additional pension benefit after retirement. Severance pay is calculated as 6.9% of each year's annual salary, revalued on the basis of 75% of inflation plus a fixed rate of 1.5% during the period of accrual, and is paid as a lump sum. Assuming that the TFR benefit is accumulated throughout a full career, it is expected to provide a pension of 10% to 15% of final pay.
3. Pre-existing funds
Before 1993, there was no coordinated legislation governing pension provision and the only private pensions available were the pre-existing funds, which had no clear legal structure or processes. As a consequence, employers who established pension plans were able to structure the benefits they offered and the means of funding them almost as they wished. Pension funds established before November 15, 1992 (pre-existing funds) may preserve their old tax treatment, provided that they were closed to new entrants by April 28, 1993.
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