State pensions comprise old age, invalidity and survivor’s pensions (pensione di vecchiaia, di invalidità ai superstiti). Total state pension contributions are around 28 per cent of gross salary, of which an employee pays approximately 9 per cent. There are various state or semi-state entities that collect contributions and pay pensions on behalf of particular groups. All employees and certain categories of self-employed people (who pay obligatory contributions to INPS) are entitled to a state pension, which is paid by the INPS.
Other employees and self-employed people receive a pension through a separate, semi-private (para-statale)organisation responsible for their profession. These include the INPDAI for industrial managers, the INPADAC for commercial managers, the INPGI for journalists and the ENPALS for those employed in the entertainment industry. The National Fund for the Liberal Professions provides pensions for a wide range of professionals, including doctors, chemists, veterinary surgeons, engineers, architects, surveyors, lawyers, tax advisers, employment consultants, notaries, customs agents and accountants.
There are three kinds of old age pension:
- A full earnings-related pension (pensione di anzianità) is paid provided you’ve contributed for a minimum of 35 years and are at least 57 years old when you make your pension claim or have made a minimum of 37 years’ contributions (increasing to 38 years in 2004, 39 years in 2006 and 40 years in 200 irrespective of your age, and have ceased to work. A new type of pensione di anzianità affects those who commenced employment on or after 1st January 1996 and those who were 18 or under on 31st December 1995. A third of your gross income goes towards a personal sum, which, together with contributions from your employer (in the case of employees), forms the basis on which your pension is ultimately calculated. For those who worked before 1st January 1996 but who made less than 15 years’ contributions before 1993 or less than 18 years’ contributions before 1996, a combined system (sistema misto) of pension calculation applies.
- A standard old age pension (pensione di vecchiaia) is paid to employees at the age of 60 (women) or 65 (for men). You must have contributed for at least 20 years to earn a partial pension, which is calculated from your last ten years’ income (see below).
- A social pension (pensione sociale) is for people who have never made any social security contributions and are without any means of income; benefit is currently around €360 per month.
The amount of old age pension payable depends on your number of years’ contributions. To qualify for a full pension, you must have made at least 156 weekly contributions or 36 monthly contributions in the previous five years, or 260 weekly contributions or 60 monthly contributions in total. Insurance contributions made in other EU member states can be taken into account when reaching this total. You can choose to make a one-off contribution (riscatto) to ‘redeem’ periods when insurance contributions haven’t been made. Such periods may include time spent at university or working abroad in countries without a social security agreement with Italy. If you’ve paid five years’ contributions, you can make voluntary contributions (contributi volontari) for periods spent raising a family or looking after a handicapped person. If you aren’t employed, you can also make voluntary contributions.
The maximum old age pension is 80 per cent of your highest average annual income received in the previous ten years of employment. In the event of the death of a pensioner, a pension is transferred to a surviving spouse or children. Pensions are indexed to the cost of living and increase annually in line with inflation (currently around 2.4 per cent per year). Pensions are paid on the first day of the month following an application to your local INPS office. State pensions aren’t taxable.
An invalidity pension is paid if you’re totally and permanently unable to work. You become eligible after five years of contributions, including at least three years in the five years preceding a claim; you must have no other form of income. Payments range from €392.69 to €526.46 per month.
A survivor’s pension is paid to the spouse of a deceased pensioner; if he or she has two or more children, the survivor is entitled to 100 per cent of the pension, if one child 80 per cent and if no children 60 per cent. A survivor’s pension is also payable to dependent children who lose both (pensioner) parents: 100 per cent for three or more children, 80 per cent for two children and 70 per cent for one child.
As in all EU countries, state pensions are under pressure from governments that can no longer afford to pay them, due to a dwindling number of workers who are supporting a growing number of retirees. Italy has particular problems, as state pensions are too generous (for the government – pensions are never too high for pensioners!), despite reforms in recent years, and more people receive their income from the state than from the private sector. Italy (along with Japan) has the highest number of retired people as a percentage of population and in 30 years’ time some 30 per cent of Italians will be over 65, which will put public finances at serious risk because the ratio of workers to pensioners will be almost equal (currently it’s two to one). From 1st January 2001, the government has offered greater incentives for people to invest in private pensions funds (fondi privati or fondi integrativi pensioni), which it’s hoped will shift some of the burden on to private insurance companies.
When you reach state pension age, each EU country where you’ve paid social security for at least a year pays you an old-age pension. For example, if you’ve worked in three EU countries, you receive three separate old-age pensions. Each pension is calculated according to your insurance record in that country. If you move to Italy after working in another EU country (or move to another EU country after working in Italy), your state pension contributions can be exported to (or from) Italy. Italian state pensions are payable abroad and most countries pay state pensions directly to their nationals resident in Italy. Non-EU nationals who haven’t reached pension age can request reimbursement of their pension contributions (plus their employer’s contributions) on leaving Italy permanently.
Further information about pensions can be obtained from the Ministero del Lavoro e della Previdenza Sociale, Direzione della Previdenza, Via Flavia, 6, 00187 Rome (06-46831) and the Istituto Nazionale della Previdenza Sociale, INPS, Via Ciro il Grande, 21, 00144 Rome (06-59051).
This excerpt has been republished with permission from Survival Books. Some of the information may apply to EU citizens only. If you would like to get the inside track on moving to Italy, pick up your copy of this great book by clicking here.