The Italian Old Age Security System in 2020

By Eva Maria Hohnerlein, Max Planck Institute for Social Law and Social Policy

Italy introduced the first old age pension insurance for manual workers on a voluntary basis in 1889 (Act No. 350/1889). In 1919, mandatory insurance was introduced and extended to low-income private sector employees. After World War II, public old age insurance schemes continually spread for all types of subordinate employment and to several groups of self-employed workers. Substantial reforms have been enacted since the early 1990s, aimed at harmonising the statutory pension rules across different professional groups. As of now, ‘standard old age protection’ in Italy is based mainly on mandatory insurance in public pension schemes and, to some extent, on voluntary insurance in occupational schemes, incentivised by tax reliefs and, since 2007, by the silent consent mechanism for transferring a statutory labour law benefit (severance pay) to such schemes. Further, old age pension benefits can be ‘topped up’ through voluntary enrolment in private pension schemes which are incentivised by tax reliefs. ‘Minimum’ protection for elderly persons with insufficient financial resources unable to support themselves is mainly addressed via means- and income-tested social assistance instruments. 

Standard Protection in Old Age

Statutory old age pension insurance is mandatory for the entire Italian workforce. In a universalistic approach all employees and self-employed persons are either subject to the general compulsory insurance (Assicurazione generale obbligatoria, AGO) organised in several social insurance schemes or to mandatory insurance in comparable public schemes, also referred to as substitutive, exclusive or integrative. All these schemes are based on a pay-as-you-go (PAYG) mechanism with benefits being linked to contributions paid throughout a person's career. The vast majority of them are administered by the National Social Security Institution INPS, with benefit calculation rules being based on a notional defined contribution (NDC) system for all new entrants as of 1996. The scheme covering most private sector workers under the AGO is the old age pension scheme for private sector employees  (Fondo pensioni lavoratori dipendenti, FPLD). General compulsory insurance (AGO) for the self-employed is organised within three special old age pension schemes, namely the scheme for farmers, tenant farmers and sharecroppers  (Gestione coltivatori diretti, coloni e mezzadri, CDCM), the pension scheme for craftsmen  (Gestione artigiani) and the pension scheme for shopkeepers  (Gestione commercianti). A fourth separate pension scheme for atypical workers  (Gestione separata lavoratori parasubordinati) was implemented in 1996 for various categories of self-employed workers not yet covered by mandatory insurance in a public scheme or any of the autonomous pension schemes for the liberal professions. Outside the AGO, smaller ‘substitutive’ insurance schemes exist for workers in specific occupational sectors (e.g. aviation, clergy, show-business) with eligibility criteria that can deviate from the general scheme, while overall financing mechanisms and benefit calculation rules have been assimilated to it. The old age pension scheme for public sector employees  (Gestione dei dipendenti pubblici) is organised within five ‘exclusive’ funds, with the largest two being the one for state civil servants and employees, and another for employees of local authorities. Besides, homemakers performing unpaid care work deriving from family responsibilities can insure themselves voluntarily in a separate scheme under the auspices of INPS. 

Standard old age protection for certified liberal professions is organised within various autonomous pension schemes for liberal professionals  (Regimi pensionistici ‘privatizzati’ dei liberi professionisti), based on mandatory affiliation according to the rules of the respective professional order, e.g. for labour consultants, lawyers, medical doctors, journalists, biologists. These schemes enjoy some regulatory autonomy, have their own financial resources, contribution, eligibility and calculation rules, and mainly apply the PAYG mechanism. 

Supplementary pensions are provided most often as voluntary, capital-funded occupational pension schemes  (Previdenza complementare ad adesione collettiva). Participation is open to all insured persons of the AGO and other standard protection schemes, but access conditions differ by the type of fund: ‘closed’ or ‘contractual’ pension funds (Fondi pensione negoziali) are the result of collective bargaining between employers’ associations and trade unions, and are implemented either as company pension funds by a single company, as industry-wide pension funds set up by the employers' association and the trade unions for a specific group of workers including self-employed workers, or as territorial funds that provide inter-categorial coverage in three regions/autonomous provinces. By contrast, ‘open’ pension funds (Fondi pensione aperti) are set up by banks, insurance companies or investment companies and asset management companies for a generic group of participants (i.e. the self-employed) and can offer both occupational pension plans (with collective affiliation) and personal pension plans (with individual affiliation). As of 2007, employees have to choose whether to invest their annual severance pay provision (Trattamento di Fine Rapporto, TFR) in a pension plan or to keep it in their company as a backup in the event of redundancy or as an additional lump sum benefit after retirement.

Top-Ups 

New forms of capital-funded individual pension plans  (Previdenza complementare ad adesione individuale) based on life insurance contracts (Piani individuali pensionistici) were introduced in 2000. They are offered by insurance companies and are incentivised by tax deductions and supervised with similar conditions as occupational pension schemes. 

Minimum 

The ‘minimum pension’ guaranteed within the statutory general pension insurance (AGO) has been abolished for new entrants as of 1996. Nevertheless, public pension schemes provide some kind of income support as an annual benefit, the so-called fourteenth pension (14ma pensione) which depends on personal income. In addition, special tax-financed social assistance measures are available to guarantee a minimum income to all elderly persons with insufficient financial means. An income-tested monthly social allowance  (assegno sociale) is provided for persons aged 67 or older who have been residing in Italy for at least 10 years. In addition, an income-tested monthly supplement, the so-called social increase  (maggiorazione sociale) can be claimed by recipients of the social allowance and of low-income statutory pensions at age 70 and above. A new means-tested citizenship pension (pensione di cittadinanza) for senior persons aged 67 or older was introduced as of April 2019, subject to the same residence clause but more restrictive access conditions in terms of household composition and means-testing criteria than the social allowance in old age.