State of Art Report Italy

Transcription

1 State of Art Report Italy 1. Introduction: main characteristics of the social security system Except the health care system, the Italian system of social protection is not organised according to an universal criterion, because for being entitled to the benefits some requirements have to be fulfilled (e.g. in terms of age, contribution records and, in some cases, a means test is added). The Italian welfare system provides for the coverage of the following social security branches: old age, early retirement, invalidity, survivors, sickness, unemployment, family, maternity and paternity benefits, as well as for benefits in respect of work injuries and occupational diseases and means tested benefits for individuals and households in need. All workers performing their activity in the Italian territory are compulsorily covered by social security insurance and both employees and self-employed are to be registered with the General Compulsory Insurance Scheme on a mandatory basis (so called AGO, standing for Assicurazione Generale Obbligatoria ). Most of the above said benefits managed by the General Compulsory Insurance Scheme are granted to the following categories of workers: private sector employees, self-employed workers - including tradesmen, craftsmen, sharecroppers, farmers and tenants - and parasubordinate 1 workers, all enrolled to INPS (National Institute for Social Security). INPS also manages a number of special provident funds for certain categories of workers, including railway and tramway workers, tax, licensing, telephone and private gas company employees, clergy men and civil aviation flight crews. Since 2012 INPS manages also benefits provided to public employees (formerly enrolled to INPDAP) and show business employees and sportspeople (formerly enrolled to ENPALS). Professionals (e.g. lawyers, medical doctors, engineers, architects) are instead obliged to enroll to the specific fund managed by their professional order (e.g. Cassa Forense for lawyers, Inarcassa for engineers and architects). Professionals lacking of a specific pension fund managed by their professional order are obliged to enroll to the Gestione Separata managed by INPS. The insurance scheme providing for protection to workers in case of occupational diseases, injuries or death at work, financed by the employers contributions, is managed by INAIL (National Institute for the Insurance against Accidents at Work) and grants either temporary benefits or life-long annuities in the event of permanent disability, or death grants. The system also provides for means-tested, income support allowances and long term care benefits granted to families and people in need, in respect of old age, low income, physical impairment. These means tested benefits are financed through general taxation and are either paid by INPS or by the competent Municipalities. 1 Parasubordinate workers, i.e. economically dependent workers, are individuals characterized by an hybrid form of arrangement. Actually such arrangement mostly represents workers formally acting as self-employed but usually performing jobs as substitutes of employees (i.e. they are obliged to work at the employer s site, they have to respect a specific working time). 1

2 Health care in kind benefits are provided by the National Health Service (Servizio Sanitario Nazionale), funded through general taxation and managed at a regional level. The afore mentioned social security institutions and professionals specific pension funds manage both the collection of contributions and the provisions of benefits. While implementing the social security provisions, they act under the guidance and supervision of the competent ministerial Authorities: the Ministry of Labour and Social Policies (Ministero del Lavoro e delle Politiche Sociali), the Ministry of Economy and Finance (Ministero dell Economia e Finanza) and the Ministry of Health (Ministero della Salute). The provision of healthcare and sickness in kind benefits, in particular, falls within the competence of the Ministry of Health (Ministero della Salute) which administers the resources, allocating them to the regional and municipal entities that are in charge of granting health services through the local health centers (so called: Aziende Sanitarie Locali) making sure that the minimum benefits, that is to say, the essential healthcare standards/levels (so called LEA, standing for Livelli Essenziali di Assistenza ) are granted to people living in all Italian Regions. The Italian social security system is financed both through social security contributions paid by employers and employees and through general tax revenue. In particular, The National Health Service (Servizio Sanitario Nazionale) is financed by all people residing on the Italian territory through general taxation. As regards to employees, compulsory contributions (e.g. for pension, unemployment or sickness benefits) are calculated as a percentage of earnings and the rates are fixed by legislative provision. The rate applicable in each case depends on the sector (e.g. industry, commerce, craft industry), the contractual arrangement (e.g. employees, parasubordinate, craftsmen, dealers), the worker s professional qualification, the number of employees, the location of the business. For the purpose of determining the contribution base, earnings are considered to cover everything the worker receives from his or her employer, in cash or in kind, as a result of their employment relationship, before deductions, with the exception of only those items that are exempted by virtue of the applicable legislation. The employer is responsible for paying both his own and the employee s contributions to the competent social security institution. Contributions are usually paid on a monthly basis. As regards to self-employed (apart from professionals enrolled to their specific private fund, which can establish their rules, according to a framework set by the national law), contributions are calculated applying the income tax return for the relevant year on the declared total labour income. Specific rebates of contribution rates regard self-employed worker s family members actively participating to the activity, farmers, sharecroppers and smallholders. Social security contributions can also be paid on a voluntary basis. Those insured persons who interrupt or cease their employment or self-employment can continue paying contributions voluntarily in order to preserve or improve their pension rights. To qualify for this right the person must have paid work contributions for at least five years over his or her working life or three years out of the five preceding his or her application for the voluntary or optional continued insurance. For certain categories of workers (seasonal, part-time, parasubordinati ), the payment of contributions for at least one year in the five preceding the application is required. Under certain circumstances, you can pay contributions to redeem periods when you were not insured. This applies, for example, to years of university studies and to periods spent working in a country with which Italy has not signed a social security agreement. Under certain circumstances, periods of contributions can be treated as insurance periods even if they have not actually been paid. Deemed contributions can be taken into consideration both for the purpose of entitlement to a benefit and in view of increasing the amount of the benefit itself. Nevertheless, periods of sickness and/or unemployment in which the person concerned was in receipt of an allowance, cannot be taken into consideration for the purpose of accruing the pre-retirement benefit qualifying conditions. Deemed contributions may be credited for: military service and redeployment; political or racial persecution; occupational injury or disease; unemployment; sickness; tuberculosis; pregnancy and 2

3 childbirth; parental leave; natural disasters; integration of contributions for workers with reduced working capacity, assistance to members of the family who are severely disabled; solidarity contracts; voluntary blood donations; special leave for public or trade unions activity; socially relevant and public service work. As said before, for each branch of the welfare system, in particular for pensions, there is one special administration which is responsible for the collection of contributions and the provision of benefits. Summarizing, the authorities responsible for the legislation and the implementation of each component of the social security system are as follows. The legislation and the supervision of the pension system fall within the competence of the Ministry of Labour and Social Policies (Ministero del Lavoro e delle Politiche Sociali), whereas the National Institute for Social Security (Istituto nazionale della previdenza sociale, INPS) is responsible to the implementation of the system for private and public (since 2012) employees and for some categories of self-employed (farmers, dealers, traders, parasubordinate workers). As regards as health care, the Ministry of Health (Ministero della Salute) is the competent institution; it administers the resources, allocating them to the regions and municipal authorities that are in charge of benefit provision through the "local health units". The Ministry of Labour and Social Policies is competent for sickness and maternity cash benefits granted to employees of the private sector, whereas the administration of contributions and benefits has been assigned to the National Institute for Social Security (INPS). Civil servants do not receive cash benefits for sickness and maternity; however, the State continues to pay their salaries. The competent institution for accidents at work and occupational diseases is the Ministry of Labour and Social Policies, while the collection of contributions and provision of benefits is carried out by the National Institute for Insurance against Employment Injuries (Istituto nazionale contro gli infortuni sul lavoro, INAIL). The competent institution for family benefits is the Ministry of Labour and Social Policies. The collection of contributions and provision of benefits falls to an ad hoc administration within the National Institute for Social Security (INPS). Part of the benefits are financed by the general taxation. The legislation and the supervision of the unemployment benefit system is competence of the Ministry of Labour and Social Policies, while the collection of contributions and the provision of benefits has been entrusted to an ad hoc administration within the National Institute for Social Security, which also includes all non-contributory benefits granted by the INPS: i.e. early retirement pensions, social pensions, minimum pensions. The Ministry of the Interior (Ministero dell'interno) has the responsibility of gguaranteeing sufficient resources. However benefits are granted at the local level and are administered by the regional and/or the local authorities and the National Institute for Social Security (INPS). After having shortly discussed the structure of the Italian social security system, in the next section we will provide detailed information about each kind of cash benefit provided by such system (i.e. health care is not taken into account), i.e. old-age public pension (section 2.1), private pensions (section 2.2), survivor pensions (section 2.3), disability pensions (section 2.4), benefits in respect of accidents at work and occupational diseases (section 2.5), sickness benefits (section 2.6), maternity and paternity benefits (section 2.7), unemployment benefits (section 2.8), long-term care (section 2.9), family allowances (section 2.10) and minimum resources (means tested) benefits (section 2.11). In each subsection, for every scheme considered, it will be highlighted in particular who are the beneficiaries, which are the entitlement conditions, how the amounts of the benefits are computed and which are the application procedures to ask for the benefits. 2. Information by typology of benefits 3

4 2.1 Public old-age pensions The applicable statutory basis is based on: Law No. 155 of 23 April 1981; Law No. 638 of 11 November 1983; Legislative Decree No. 503 of 30 December 1992; Law No. 335 of 8 August 1995 on pension reform; Law No. 243 of 23 August 2004 on the promotion of supplementary pensions; Law No. 247 of 24 December 2007 on finances and pension reform; Law No. 133 of 6 August 2008 on the elimination of limitations to the accumulation between pensions and work; Law No. 122 of 30 July 2010 concerning urgent measures in the field of financial stabilization and economic competitiveness; Law No. 214/2011 (Monti-Fornero Reform). Public pension schemes are compulsory social insurance schemes financed by contributions covering employees with earnings-related pensions depending on contributions and the duration of affiliation. Some special schemes for the self-employed exist, i.e. covering farmers, tenants, self-employed craftsmen and merchants /retailers. Professionals are obliged to enroll to the private pension fund managed by their professional order or to the Gestione Separata managed by INPS if the professional does not belong to a specific order or the order does not manage a specific fund. Currently, according to their seniority at the moment of the 1992, 1995 and 2011 reforms, workers are enrolled in three different public pension schemes, deeply differing about the benefit computation formula. The 1995 pension reform introduced a new system for calculating the old-age pension in respect of contributions. This contribution-related system (so called contributivo or notional defined contribution - NDC) applies to all workers insured for the first time after 1 January Under this system contributions are paid into each worker s insurance account, calculated on the basis of a defined rate: this is equal to 33% of the gross earnings for employees; 20% and 21% of profit derived from trade or business up to ,00 and from ,00 to ,00 respectively for self-employed workers (contribution rates on self-employed are going to gradually increase up to 24% in 2018); 27,72% for parasubordinate workers enrolled to the Gestione separata (the contribution rate is gradually increasing up to 33% in 2018). Contributions are accumulated in notional individual accounts 2 and the annual rate of return on the accumulated contributions is set equal to the average nominal GDP growth rate in the previous five years. At the retirement, the accumulated amount (i.e. paid-in capital plus revaluation) is multiplied by a transformation coefficient linked to the age of the worker when the pension is claimed in order to compute the amount of the annuity. The transformation coefficients depend on the average unisex life expectancy at the retirement age (taking into account the probability to leave a survivor pension) and they are updated every two years in line with the official demographic projections provided by ISTAT. Pensions paid under this system cannot be topped up by the minimum pension. Poor elderly can receive a means tested social allowance (assegno sociale) when they reach a specified age (currently 66 years old), independently on their previous contribution record. The earnings-related system (so called retributivo) applies to insured workers who had accrued at least 18 years of insurance contributions as of 31 December For each year of paid contributions, 2% of the average pay is taken into account for pension calculation. Regressive rates are applied to earnings above a certain ceiling. The maximum pension is based on forty years of contributions. According to the 2011 reform, workers enrolled to retributivo will receive a benefit computed according to the NDC rules for the years of seniority following A mixed system (called pro rata) runs in parallel. For insured persons who had not accumulated 18 years of insurance contributions as of 31 December 1995, the pension is calculated according to the earnings- 2 Individual account are notional, because the Italian public pension system is pay as you go financed. 4

5 related system for the portion corresponding to this period and according to the NDC system for the portion corresponding to the insurance contributions matured since 1 January The earnings related quotas of the retributivo and pro rata schemes are computed according to the following formula, where n is the seniority at the retirement and E the reference earning: Earnings up to 42, (ceiling): 2%*n*E. Partial amount up to 57, (ceiling*1.33): 1.6%*n*E. Partial amount up to 71, (ceiling*1.66): 1.35%*n*E. Partial amount up to 81, (ceiling*1.90): 1.1%*n*E. Earnings over 81,618.30: 0.9%*n*E. Some non-contributory periods are credited; in particular there is total consideration for periods of illness, maternity, military service, unemployment and receipt of allowances for persons benefiting from specific measures because of a shut-down or a reorganization of the enterprise. People enrolled to retributivo and pro rata are entitled to receive a minimum pension if their pension benefit does not exceed a fixed threshold. The entitlement to the minimum pension is subjected to means tested. To be entitled to the minimum pension, the income of retired and of his/her spouse must not exceed certain limits, which are set annually. The personal income limit for 2011 is 6, If the income is between 6, and 12,153.18, the individual is entitled to a reduced supplement. If the income is over 12,153.18, the individual is not entitled to any supplement. The combined income limit for a couple, for 2011, is 18, If the income is between 18, and 24,306.36, the couple is entitled to a reduced supplement. If the combined income is more than 24,306.36, the couple is not entitled to any supplement. Only pensions paid under the earnings-related scheme can be topped up till the minimum pension amount is reached. Pension benefits are indexed according to the inflation rate according to the following modalities: For the pension amount up to five times the minimum pension: 100%. For the amount exceeding five times the minimum pension: 75%. As extraordinary measure for 2012 and 2013, pensions whose amount is higher than 3 times the minimum pension are not indexed at all in these two years. Pension benefits can be fully combined with employment and self-employment income. Pensions are subject to taxation according to the general taxation rules of personal income. No special reliefs for pensions are provided. All employed persons, self-employed (farmers, sharecroppers and smallholders, tradesmen and merchants) and professionals are conditionally entitled to an old-age pension upon certain qualifying conditions, but the rules governing this sector vary considerably, depending on the insurance category, and they have been recently changed. Application for retirement benefits must be addressed directly to the competent social security Institution. Forms are available on the relevant institution website. People could retire according to two conditions: age (receiving old age pensions) and age and seniority (receiving and early retirement benefit, pensione d anzianità). However, since 2012 requirements to be eligible to both old-age and seniority pensions have been highly tightened. Actually, pensions reforms have been a national priority and dominated the public debate since the beginning of the 90s, with the main aim to ensure financial sustainability for the social security system in the short and in the long term, and also in order to pursue the scopes to develop private pension schemes and to reduce iniquities and disincentives engendered by the earnings-related computation formula of the public pillar. 3 Hence, since 2012 a sort of pro rata applies also for workers enrolled to the retributivo (i.e. a system earnings related up to 2011 and NDC afterwards). 5

6 Hence, since 1992, a never-ending series of reforms (1992, 1993, 1995, 1997, 2004, 2005, 2007, 2009, 2010, 2011) has radically transformed the Italian pension system, modifying several basic parameters of the public system as the computation formula, the indexation rule, the requirements for being eligible to oldage and early retirement benefits and trying to foster the development of private occupational and personal plan. As a consequence of the reform process, the public scheme, that is still pay as you go financed, changed from an earnings related defined benefit formula (the so called retributivo) to a notional defined contribution one (NDC, the so called contributivo); retirement ages significantly rose and further increases are expected in the future due to the automatic link with the life expectancy; the institutional architecture started to change from a single-pillar towards to a multi-pillar configuration, even if the public pillar is currently still largely predominant. Hence, for better understanding the current features of the Italian public pension system a history of the reforms introduced in the last 20 years is very helpful The reforms of the 90s Following the numerous expansionary reforms of the 1950s-60s, at the beginning of the 90s the Italian pension system presented a single pillar structure made up of an inclusive public pay as you go earningsrelated tier (called retributivo), covering almost 100% of the workers, also providing a means-tested pension supplement (integrazione al minimo) for retirees with very low contributory pensions. A meanstested not generous social assistance allowance (pensione sociale now called assegno sociale) was instead provided to poor elderly which did not fulfill seniority requirements for contributory pensions. Actually, retirement ages were the most generous aspect of the Italian pension rules at the beginning of the 90s. In Italy, retirement has been historically allowed according to two different kinds of requirements: i) an age requirement, that defines the regime of the old-age pensions ; ii) a seniority requirement, that defines a specific early retirement scheme, i.e. the so-called seniority pensions. Up to 1992, retirement ages were very favorable: old age pensions were paid at 60 for males and 55 for females (with at least 15/20 years of seniority) and, independently on age, workers getting 35 years of contributions were entitled to get a seniority pension (much lower requirements were set in many sectors, firstly for public employees, especially for females). The earnings-related defined benefit formula is P=c*AC*E(W), where AC is the seniority, c is coefficient showing the return for each year of contribution (usually around 2%, but higher in some sectors, e.g. for public employees and managers) and E(w) an average of final earnings, which was based on last 5 years for private employees and last final monthly wage for public employees up until Hence, being linked to final salaries, the retributivo offered comparatively generous gross benefits replacing roughly 75%-80% of previous wage after 40 years of contribution. Further, up to 1992 the same date, pensions were indexed by the rate of growth of nominal wages. The generosity of public pensions broadly crowded out supplementary private pensions which were virtually unknown until the mid-1990s. The single pillar pension system effectively guaranteed income maintenance to the whole workforce, as well as (limited) protection against poverty to those elderly not entitled to contributory pensions. This scenario, however, was doomed to disappear. Joint pressures from the EU convergence parameters set in Maastricht and the 1992 crisis had a tremendous impact on the Italian pension system, which presented three main drawbacks: i) a critical financial situation, mostly in the long run due to the intense ageing of the population; ii) a strong incentive to early retirement (the earnings-related formula did not take into account the retirement age, then engendering an implicit tax on the job continuation); iii) wide (and often regressive) inequities due to both the different defined benefit formulas and eligibility conditions across occupational categories and to the fact that the retributivo strongly advantaged individuals having a steep wage profile at the end of their career. 6

7 Actually, as evident from the specific earnings related formula, pension benefit did not depend at all on retirement age, then engendering a strong disincentive to continue to work once requirements for retirement had been reached. Iniquities and disparities were linked to the fact that the parameters of the earnings related formula differ among the various workers categories (often advantaging the most paid ones) and to the fact that linking the benefit amount to last wages the formula gave a higher return to individuals characterized by a steeper wage growth at the end of the working life. As a consequence of the interaction of low retirement ages, generous formulas and a fast ageing of the population, the pre-92 pension rules would have engendered in the next decades huge increases of the pension spending. Hence, the main target of the reforms introduced in 1992 ( Amato reform ) and 1995 ( Dini reform ) was restrain the rise of the ratio between pension spending and GDP. Anyway, mostly the 1995 reform explicitly focused also on weakening disincentives and iniquities. In particular, the 1992 Amato reform adopted the first parametric retrenchment intervention in the first pillar, extending the number of years which the earnings related benefit were based on and changing the indexation rule, and paved the way for the multi-pillarization of the Italian pension system by introducing the first regulatory framework for supplementary funded pensions. In particular the main measures introduced in such reform (Law n. 503) were the following: A gradual increase of the age requirements for old age pensions from 60 and 55 (respectively for males and females) to 65 and 55. An introduction of a minimum age limit gradually increasing up to 57 for being eligible to seniority pensions. The E(W) of the computation formula was extended to the whole working life rather than only to final years. This extension was phased in very gradually, because the formula did not substantially change for individuals having already accrued in years of seniority, whereas for the others the reference to the whole career concerned only periods worked after 1992 (i.e. only individuals entered in the labour market since 1993 would have received a pension completely based on the whole working history). A harmonization of rules applied to the different workers categories, in particular among private and public employees. Changing from nominal wages to prices the indexation rule of pension benefits. Further, an incomplete indexation to inflation were set for the part of pensions exceeding some brackets (5 times the amount of the minimum pension). Major changes were introduced by the Dini reform (L. 335/95), that, replacing the traditional earningsrelated system with the new notional defined contribution system (called contributivo), structurally modified the logic of functioning of the public pension pillar. The public pension scheme remained pay as you go financed, but in the new NDC system benefits are computed, following neutral strict actuarial rules, on the basis of contributions actually paid on which each year a rate of return equal to the average nominal GDP growth of the last five years is guaranteed and according to the age of retirement. Coherently with the actuarial logic of the scheme, the retirement age was made flexible in the age bracket 57-65, then removing the difference between old-age and early retirement schemes. Specifically, pensions are computed as P=M*CT, i.e. by multiplying the accumulation of contributions (M) for the so-called transformation coefficients (CT), which convert such amount into an annuity according to the life expectancy at the retirement age. Thus the NDC induces neutrality as regards to the choices of retirement because the annuity grows in an actuarially fair way when the withdrawal is postponed. The means-tested pension supplement is no longer provided in the new NDC scheme; poor elderly, independently of their previous contribution record, are only entitled to the means-tested social allowance for people over 65 (assegno sociale, amounting to 5,577 Euros per year in 2012). 7

8 However, a very gradual phasing in of the new NDC scheme was established. Individuals working in 1995 since more than 18 years continue to be included in the previous earnings related scheme (apart from the measures introduced in the 2011 reform, see section 4.4), whereas those working at that date since less than 18 years have a mixed benefit (the so-called pro rata, i.e. earnings-related for the contribution years up to 1995 and NDC after). Only individuals who entered in the labour market after 1995 receive a pension entirely based on the new formula The reforms introduced in the last decade Also at the beginning of the new century pension reform remained on top of the political agenda, firstly because policy makers wanted to increase retirement age in order to reduce pension spending during the long transitional phase towards the phasing in of the NDC scheme. Further, as discussed in section 4.5, measures for increasing the participation to supplementary private schemes were introduced too. In particular, the 2004 reform issued by the centre-right wing Government raised the age requirement for seniority retirement, bringing it from 57 to 60 years from 2008, with an abrupt 3-years rise (the so called big-step). Contextually, the flexibility of the retirement age in the NDC scheme was deleted and it was established that people enrolled to the contributivo would have been characterized by the same requirements for old-age and seniority pensions of workers enrolled to retributivo and pro-rata schemes. Afterwards, the new centre-left wing Government issued in 2007 the so-called Protocol on Welfare (Law n. 247) that annulled the big-step introduced by the 2004 reform, establishing new criteria for being entitled to seniority pensions based on the so-called quotas, i.e. requirements were based on the sum of age and years of contributions (having been accrued at least 35 years of contributions; requirements are one year higher for self-employed; see table 1). Anyway, the possibility to retire independently on age having accrued 40 years of contributions was confirmed. Since 1/1/2008 Since 1/7/2009 Since 1/1/2011 Since 1/1/2013 Tab. 1: Eligibility requirements to the seniority pensions established by the 2007 reform Employees Self-employed 58 years old and 35 years of contributions 59 years old and 35 years of contributions 59 years old and quota 95, with at least 35 years of contributions 60 years old and quota 96 (i.e or 60+35) 60 years old and quota 96, with at least 35 years of contributions 61 years old and quota 97 (i.e or 61+35) 61 years old and quota 97, with at least 35 years of contributions 62 years old and quota 98 (i.e or 62+35) Further increases of the retirement age were introduced afterwards. In the 2010 Budget Law, following a rule of the European Court of Justice, Italy took the first step towards a pension system with the same retirement age for old-age pensions for men and women by raising it to 65 for females working in the public sector starting from January The same Budget Law introduced the so-called mobile window, fixing a window of 1 year between the achievement of the eligibility requirements for old-age and seniority pensions and the effective retirement, thus increasing of one year the effective retirement age. Moreover, measures introduced in 2009 and strengthened in 2011 have linked the pensionable age (both for quotas and old age limits) to increases in life expectancy. Specifically, it has been established that starting from 2013, statutory age requirements to access ordinary old-age pensions, seniority pensions and social assistance benefit will be automatically increased every three year. The adjustment will be applied in line with the increase of life expectancy at age 65, as measured by ISTAT with reference to the previous three-year period. As a result, according to current projections, the consequent increase of the retirement 8

9 age should be about 1 year each ten years and the cumulative increase by 2050 in statutory retirement age due to gains in life expectancy is expected to be about 3 years and 9 months The reform of December 2011 After one month from its designation, the new Monti Government introduced a new comprehensive pension reform, with the main aim to obtain immediate savings on pension spending through a significant increase of the retirement age. In particular, on the one hand, the reform has established that the old-age retirement age for women in the private sector goes up from 60 to 62 years in 2012, with a gradual increase up to 66 years in 2018, whereas the male retirement age rises to 66 years in On the other hand, much stricter limits to early retirement have been introduced. The possibility to retire according to the quotas (table 4.1) has been abrogated and since 2012 early retirement (with reduced benefits if the individuals retirees before 62 years old) is possible only having accumulated 41 years of social contributions (for women) or 42 years (for men). Moreover, a 2-year halt to pension indexation worth more than monthly 1,400 Euros has been introduced. Further, speeding up the transition to the notional defined contribution scheme, it has been established that pension benefits of individuals enrolled to the retributivo (i.e. individuals having accrued at least 18 years of contributions at the end of 1995) and still active will be based on a new pro rata scheme, i.e. their benefits will be computed according to the retributivo for years before 2011 and according to the contributivo for annuities from 2012 onwards. In line with previous measures, the reform has confirmed that retirement ages and the seniority record for the early retirement will be risen according to the increase of life expectancy. Hence, around 2040 (when the first cohorts entirely belonging to the NDC will retire) the effective retirement age will reach 69 and the seniority record for early retirement will be set at 44 years for females and 45 for males. Moreover, individuals enrolled to the NDC will be characterized by rules much tighter than the ones introduced by the 1995 reform as regards to the retirement age. The 2011 reform has recovered some flexibility of the retirement age, but at much higher ages and setting stricter requirements about the pension amount and the minimum seniority than those introduced by the 1995 reform (that established that individuals could retire when aged between 57 and 65 years old having paid at least 5 years of contributions; retirement was allowed before 65 if the benefit exceeded 1.2 times the amount of the assegno sociale). In particular an individual can ask for a pension only if he/she has accrued at least 20 years of contributions and the amount of his/her pension is at least 1.5 times the assegno sociale. Anyway, if the amounts exceeds 2.8 times the assegno sociale the individual can retire 3 years earlier. On the contrary, whenever the seniority were lower than 20 (but higher than 5) or the pension amount were lower than 1.5 the assegno sociale the annuity can be received 4 years later the old-age limit. Hence, for instance, considering the expected automatic increase of eligibility requirements due to the rise of life expectancy, an individual having started to work in 1996 will retire around 2040 according to the following conditions: 69 years if he/she has at least 20 years of seniority and a pension benefit amounting at least 1.5 times the assegno sociale. 66 years if he/she has at least 20 years of seniority and a pension benefit amounting at least 2.8 times the assegno sociale. 73 years if he/she has a seniority higher than 5 and lower than 20 years or a pension benefit amounting less than 1.5 times the assegno sociale (anyway if without other income sources at 69 this individual will be entitled to the assegno sociale). Can get an early-retirement pension if he/she has accrued at least 44 years of contributions if female, 45 if male. 9

10 2.2 Private pensions The applicable statutory basis is based on: D.L. 124/1993; Law No. 335 of 8 August 1995 on pension reform; D.L. 47/2000 e 168/2001; Law No. 243 of 23 August 2004 on the promotion of supplementary pensions; D.L. 252/2005; Law No. 247 of 24 December 2007 on finances and pension reform. Since 1993 Italian policy makers have favored the development of funded supplementary pillars in order to compensate retrenchment interventions in the public pension system. Supplementary pillars were introduced on a voluntary basis, they are fully funded financed and provide defined contributions (DC) pensions only. Following the 1993 reform and subsequent revisions, the supplementary pillars are organized through three different types of pension institutions: closed (collective occupational) funds (CPF), open funds (OPF), and personal pension plans (piani pensionistici individuali, PIP). Closed funds are set up within the frame of collective bargaining between employer and trade unions and are not for profit institutions. They can be created at several levels: company or group of companies, industrial or economic sectors (job category), geographical areas; the self-employed associations can also set up organize a closed pension. The regulatory framework does not allow CPF to manage assets, thus they have to contract with financial institutions like banks, insurance companies, investment firms or asset management companies. Open funds are promoted and managed by banks, insurance and investment companies. They can offer both personal and occupational (i.e. based on a collective enrolment) plans. It has to be stressed that OPF are thus hybrid institutions, comprising both second and third pillar forms depending on affiliation modes: consequently, in Italy a true difference between occupational and personal schemes (i.e. second and third pillar) does not depend on the type of pension fund (closed or open), but on affiliation modes (collective or individual). Since 2000, personal pension plans can be offered also through life insurance contracts (PIP), under the conditions that the benefits have to be paid according to the same rules applied to pension funds. They receive the same tax treatment and incentives of pension funds. The 2005 reform has introduced some new rules for PIP, mainly concerning the kind of administrative costs they can impose on buyers. However it has to be pointed out that, before the main 1993 reform, several hundreds of pension funds (so called pre-existing funds) were already operating; they were usually sponsored by banks and insurance companies in favor of their employees (they are a sort of fringe benefits for their employees). At present about 450 pre-existing funds still exist, with about 650,000 members. They can continue to operate in their original forms, without following the 1993 rules; they have different investment limits to the new kinds of funds and can also offer defined benefits, but after the 1993 reform the defined benefit plans have been closed to new members. Aiming at fostering the development of supplementary pillars trough the voluntary devolution of the TFR, the 2005 reform (phased in 2007), introduced the silent consent formula for the transfer of the latter to supplementary funds: i.e. if a worker does not explicitly disagree in a six months period, his/her TFR flows (not the stock already accumulated by firms) are transferred from firms to pension funds. However, only the choice to devolve it to a fund is irreversible, given that, even after the six months, workers can always decide to devolve TFR flows to private pension schemes. Further, the reform stated that the TFR can be transferred to any kind of fund (closed, open and PIP, i.e. even in case of individual participation to funds). However, if the worker does not clearly declare to which fund it should be paid, the TFR is automatically transferred to the closed fund of his occupational category. Further, additional employers and employees contributions set in collective agreements can be paid only to collective funds, thus representing a strong advantage for closed funds. Therefore, after reforms the new pension architecture presents a public NDC pillar and a complex system of private pension schemes, though the latter are still underdeveloped in terms of actual coverage and take up rates. 10

11 According to the most recent data, the take-up rate in private supplementary schemes is still limited: about 2,850,000 individuals were members of closed and open pension funds (respectively 2 million and 850,000), and the enrolment growth rate in both types of funds has been almost null since Personal plans based on life insurance contracts (PIPs) seems more appealing, given that currently 1.9 millions of individuals have subscribed a plan, with a growth rate around 10% each year. The total number of individuals enrolled in supplementary schemes, including pre-existent funds, thus amounts to 5.4 million out of slightly less than 23 million employed. Currently, the take-up rate of closed and open funds is 27.8% among private employees (4% among public employees due to the later starting of supplementary schemes in the public sector and other constraints,) and 23% among the self-employed. Before the reform concerning the devolution of TFR (phased in 2007) the take-up rate among private employees was much lower (around 15%); however so far the target of enrolment rate set by policy makers (40% among private employees) is still far to be reached. However, the weak development of the private pillars, and their modest role in increasing future pensioners prospects is due to a lack of confidence in supplementary schemes rather than to a low contribution rate to these schemes by participants (summing TFR, employer and employees contribution who participates pays about 9.5% of his/her wage). In particular maybe both for binding liquidity constraints and high discount rates of future pension benefits the enrolment rate is very low among young generations, although their future replacement rates have been hugely reduced by the introduction of the NDC and pension funds are usually considered the main tool available to youngest for increasing pension replacement rates. Pension funds members average age is in fact very high (about 44 years old versus 40 years among employees) and only 20% of funds members is younger than 35 (32% among employed). Pension funds provide two different kinds of benefits: old age pensions, when the worker has at least 5 years of seniority in the fund and has reached the age required for the old age pension in the public scheme; seniority pensions, when the worker retires at an age no more than 10 years lower than the one required for the old age pension in the public scheme and has at least 15 years of seniority in the fund. The tax regime for all private schemes (closed and open funds and new PIPs) is a sort of hybrid ETT: contributions are exempted until a threshold of 5,165 Euros each year; investment returns are taxed by an 11% proportional rate; benefits are taxed before 2007 by the progressive personal income tax rates, after such date by a proportional rate between 9% and 15%, depending on the seniority in the fund exempting, however, the share on which the tax on investment returns have already been paid. But these fiscal rules seem very controversial, especially on equity grounds. Apart from the costs on public budget of such tax expenditure (that will materialize only in the future, given that such incentives regards the far benefits payment phase), a deep incoherence between a public scheme which taxes progressively benefits and a private one which taxes benefit less and in a proportional way emerges. Moreover such fiscal rules are substantially regressive, because the proportional rate applies to a system whose membership probability increases with income. Consequently, such tax rates differences could induce in the long run a strong demand by the well off group, that are relatively very advantaged by such fiscal rules, to reduce the contribution to the public system in order to increase private pension savings (i.e. a demand of opting out from public to private schemes). 2.3 Survivor pensions The applicable statutory basis is based on the following laws: Law No. 155 of 23 April 1981; Law No. 638 of 11 November 1983; Legislative Decree No. 503 of 30 December 1992; Law No. 335 of 8 August 1995 on pension reform; Law No. 243 of 23 August 2004 on the promotion of supplementary pensions; Law No. 133 of 6 August 2008 on the elimination of limitations to the accumulation between pensions and work; Law No. 122 of 30 July 2010 concerning urgent measures in the field of financial stabilization and economic competitiveness; Law No. 214/2011 (Monti-Fornero Reform). 11

12 Survivor pension is paid to certain members of the deceased s family. There are two typologies of survivors pensions according to the professional status of the decedent at the moment of his/her death: a survivors pension (pensione di reversibilità) is granted if the deceased pensioner was receiving a direct pension, and an indirect pension (pensione indiretta) if at the time of his or her death the deceased worker was not yet receiving a direct pension but was fully entitled, with regard to insurance and contributions requirements, to receive an ordinary invalidity allowance or disability pension, or to receive the old-age pension. Survivor pensions benefits cover all employees in the private sector, whereas special schemes concern farmers, tenants, self-employed craftsmen and merchants/retailers. No exemptions from compulsory insurance are allowed. Contribution records to be entitled to receive a normal indirect pension are: 5 years of contributions of which 3 during the last 5 years, or 15 years of contributions during any time. If the insured person dies at work and if the survivors are not entitled to another pension, a Privilege pension (pensione privilegiata) is paid irrespective of the above mentioned contribution conditions. If the insured person was not yet entitled to a pension and had contributed at least 1 year in the course of the 5 years before his death: survivors receive a once-off allowance (Indennità "una tantum") of 45 times the total contributions paid. The family members who are entitled to the pension are: the spouse and any children who, at the time of death, are minors, students or disabled; parents who, at the time of death, are 65 years of age or older, have no pension and are dependent on the deceased, if there is neither spouse nor children, or if they do exist, but they are not eligible; unmarried brothers and sisters who, at the time of death of their predecessor are disabled, without direct or indirect pension, and dependent on the deceased, if there is no spouse, children or parents, or if they do exist but they are not eligible. Hence the order of priority to be entitled to a survivor benefit is: spouse, children, relatives in ascending line. In case of divorce, a widow/widower receiving maintenance can obtain the survivor's pension (pensione ai superstiti) by decision of a judge. Cohabitants or partner of the decedents are not entitled to receive benefits. Sons and daughters are entitled to receive a survivor benefit up to the age of 18, increased to 21 when studying full time, 26 when studying at university. Parents, brothers or sisters and grandchildren of the insured person may be entitled if there are no other survivors. When the survivor s spouse remarriages the benefit provision stops. The contingency covered is the retired or insured person s death. The rate of the direct survivors pension is 60% for the surviving spouse, 20% for each child. Any eligible parents, brothers and sisters receive 15% each. The sum of all fractional survivor pensions cannot exceed 100% of the direct pension. For pensions payable after 1 September 1995, the percentage for a single surviving child rises from 60 to 70%, and to 80% for two children. Since 1 September 1995, the amount of the survivor pension can be reduced by 25, 40 or 50% when the beneficiary s income is above a certain level. From this same date, survivors pensions paid by the compulsory general insurance following an accident at work or occupational disease cannot be drawn at the same time as a life annuity for the same event, up to the amount of the annuity. The more favorable provisions in effect prior to 1 September 1995 remain in force and will be gradually phased out as future adjustments are enacted. The minimum pension amounts to per month, whereas no maximum pension is set. Benefits are subject to taxation according to the general taxation rules on personal income and without special relief for benefits. The pension is paid following application from the first day of the month following that of the death of the retired or insured person. Application for survivors pension must be addressed directly to the competent social security Institution. 2.4 Invalidity and disability benefits The applicable statutory basis is based on the following laws: Law No. 222 of 12 June 1984 on invalidity and incapacity; Law No. 335 of 8 August 1995 on pension reform; Law No. 243 of 23 August 2004 on the promotion of supplementary pensions; Law No. 247 of 24 December 2007 on finances and pension reform; 12

13 Law No. 122 of 30 July 2010 concerning urgent measures in the field of financial stabilization and economic competitiveness; Law No. 214/2011 (Monti-Fornero Reform). All employed persons and certain categories of self-employed workers (farmers, sharecroppers and smallholders, tradesmen and merchants) are covered for disability insurance and are also entitled to a disability pension. As regards as self-employed, the rules vary considerably, depending on their professional order. Two typologies of disability benefits are provided: i) invalidity allowance (assegno ordinario d'invalidità); ii) disability pension (or incapacity pension, pensione di inabilità). For being entitled to these two kinds of benefits 5 contribution years with at least 3 during the last 5 years are needed. Anyway, in case of occupational invalidity (i.e. it has been caused by circumstances of employment other than industrial injury), no contribution records are required. An insured person whose working ability, in occupations suited to his capacity, is permanently reduced to at least two thirds as a result of sickness or infirmity (physical or mental) is considered as invalid for the purpose of invalidity allowance. The disability pension is instead payable to the insured person or beneficiary of the invalidity allowance who is absolutely and permanently incapable of any occupational activity, as a result of sickness or infirmity (physical or mental). The ordinary invalidity allowance can be claimed by all insured workers, whose working capacity is permanently reduced by more than two thirds, and who have accrued five years of contributions, three of which matured in the five years prior to lodging the benefit claim may qualify for an ordinary invalidity allowance. Such benefit is paid for up to 3 years but it may be extended for further subsequent 3-year periods. Once entitlement has been reassessed by means of three medical assessments, upon the beneficiary s request, and the allowance has, therefore, been extended twice consecutively, the benefit can be confirmed indefinitely. The invalidity allowance, therefore, is characterized by a long observation period of the invalid worker to check the possibility for recovery. Besides this, it cannot be passed down to survivors. In case of an accident at work or an occupational disease the assegno ordinario d'invalidità can be granted. However such allowance cannot be paid at the same time as the life annuity in respect of the same accident (see section 2.5), up to the amount of the annuity itself (Law No. 335 of 8 August 1995). However, if the incapacity pension paid by the National Institute for Social Protection (INPS) is higher than the employment injury pension (rendita da infortunio sul lavoro - vitalizia) paid by the National Insurance Institute for Employment Injuries (INAIL), then the differing amount can be paid to the injured individual. Furthermore, when an invalidity allowance is paid to a beneficiary receiving income above a certain ceiling and derived from paid work, self-employment or from an enterprise, the amount of the allowance is reduced by 25-50% (respectively if the recipient's income is 4 to 5 times higher than the minimum pension). The disability pension can be claimed by the insured disabled worker who has been assessed with a total and permanent incapacity to perform any of the activities he had an aptitude for, due to infirmity or physical or mental impairment. Entitlement is conditional upon a minimum of 5 years of contributions, 3 of which accrued in the last 5 years prior to lodging the relevant claim as well as on the absence of all other forms of labour income, including earnings from self-employment and unemployment benefits. The disability pension can be passed down to the deceased pensioner s survivors and it is replaced by the oldage pension at retirement age. Once reached the retirement pension age, the invalidity allowance is converted into an old-age pension if: a) the individual meets the insurance period and contributions criteria; b) he/her stopped to work. The periods spent receiving the benefit and being not engaged in employment are taken into account for pension entitlement but not for the purpose of calculating the amount of the pension benefit. The disability pension is made up of the amount of the invalidity allowance plus an increase proportional to the number of years of contributions the injured individual would have completed had he/she continued to 13

14 work until retirement age. This pension is incompatible with income from employment or self-employment, with unemployment benefit and with other allowances replacing or supplementing earned income. The claim for the invalidity and disability benefits is to be addressed to the competent Institution. Invalidity allowances and disability pensions are paid from the first day of the month following the one in which you lodged your claim or during which the contingency occurred. Disability benefits are financed through compulsory social insurance schemes financed by contributions covering employees, with earnings-related pensions depending on contributions and the duration of affiliation. Special schemes for the self-employed are granted. No exemptions from compulsory insurance are allowed. The benefit amount depends on the reference earnings and on the number of insurance years. Consistently with the different methods of calculation of old-age pension for people enrolled to retributivo, pro rata or contributivo, the reference earnings (henceforth E ) changes with the total seniority at 1992 and E is computed as follows: For those who on 31/12/1992 had worked at least 15 years: average earnings during the last 5 years, with ceiling. For those who on 31/12/1992 had worked less than 15 years: average earnings over a variable period of between the last 5 and 10 years, with ceiling. For those first employed since 1/1/1996, the calculation is based on the total of contributions of the entire working life. The amounts of the invalidity allowance and of the incapacity pension are computed as follows, being n the number of years of insurance (maximum 40): Earnings up to 42, (the ceiling): 2%*n*E. Partial amount up to 57, (ceiling*1.33): 1.6%*n*E. Partial amount up to 71, (ceiling*1.66): 1.35%*n*E. Partial amount up to 81, (ceiling*1.90): 1.1%*n*E. Earnings over 81,618.30: 0.9%*n*E. For persons insured since 1/1/1996, i.e. enrolled to the new notional defined contribution pension scheme, the benefit depends on the accumulation of yearly contributions, i.e. the same rules of the contributivo are applied. The conventional contribution amounts to 33% of the income for each contribution year. The yearly rate of returns of contributions is the mobile average of the nominal GDP in the previous five years. The pension is calculated by multiplying contribution amounts by an actuarial coefficient which varies according to age. No supplements on the amount of both kinds of benefits are provided for dependants (spouse, children, other dependants). In case of disability pension, some non contributory periods are taken into consideration. Actually, the years between the date of liquidation of the pension and the retirement age are added. For people enrolled to the NDC scheme (i.e. persons insured since 1/1/1996) the minimum actuarial transformation coefficient for the age of 57 also applies for those under 57. Furthermore the seniority increases of 2 months per year (up to a maximum of 5 years) in case of disability of at least 74%. No minimum pension is granted to individuals enrolled to the NDC scheme, whereas individuals enrolled before 1996 can be entitled to a minimum pension, amounting to 6, yearly and paid if the annual taxable income of the person concerned is less than double than the minimum social pension or, if the individuals is married, is less than 3 times the social pension. On the contrary, no statutory maximum pension exists. Disability pension beneficiaries who are unable to perform the most basic daily life activities can also be entitled to a constant attendance allowance on a monthly basis (assegno di assistenza personale e continuativa, amounting in 2011 to ), the amount of which is fixed under the compulsory accident- 14

15 at-work and occupational disease insurance scheme managed by the National Institute for the Insurance against Accident at Work (INAIL). Applications must be accompanied by documentary evidence of the person s state of health. This supplement cannot overlap with the welfare-based allowance paid by INPS covering long-term care. The indexation of disability benefits is the same of old-age pensions. Hence, the annual indexation is based on the inflation rate according to the following modalities: For the part of the pension up to five times the minimum pension: 100%. For the part of the pension exceeding five times the minimum pension: 75%. As said, the invalidity allowance can be partially cumulated to labour income, whereas the incapacity pension cannot be cumulated to labour income. Benefits are levied by the usual tax rates applying to personal income taxation. 2.5 Benefits in respect of accidents at work and occupational diseases The applicable statutory basis is based on: Decree of the President of the Republic (DPR) No of 30 June 1965; Law No. 251 of 10 May 1982; Legislative Decree No. 38 of 23 February 2000; Decree of 9 April 2008 on the new table of occupational diseases, amended by Decree of 11 December 2009; Law No. 122 of 30 July 2010 concerning urgent measures in the field of financial stabilization and economic competitiveness; Law No. 214/2011 (Monti-Fornero Reform). Occupational diseases in industry and agriculture are regulated by the Decree of the President of the Republic (DPR) No. 336 of 13 April Household accidents are regulated by Law No 493 of 3 December The National Institute for Insurance against Accidents at Work (INAIL) is responsible for providing benefits in respect of accidents at work and occupational diseases. Contribution rates are set according to the degree of risk in the various occupational sectors. The rate, varying between 0.3% and 13%, is calculated on the basis of the total wage. They are paid exclusively by the employer. All employed persons engaged in certain types of occupation or business that according to Italian law can give rise to occupational injury or disease are insured against these risks and are entitled to benefits in respect of accidents at work and occupational diseases. These schemes are then organized through a compulsory social insurance scheme for employees and certain categories of self-employed financed by contributions of employers and self-employed providing benefits in kind and cash benefits. Certain categories of self-employed, such as lawyers and other liberal professions; firemen; military and police forces can be exempted from the compulsory insurance. The risks covered by these schemes are: Accidents at work: i.e. Injury occurred at work by a violent cause in connection with a risk related to the performed activity, and resulting in: i) death or permanent (partial or total) incapacity to work; ii) temporary total incapacity to work lasting more than three days. Travel between home and work. Occupational diseases: a list of occupational diseases for industry and for agriculture has been set Anyway, there is the possibility of compensation for diseases not in the list provided that the employee proves the occupational nature and origin of the disease. The conditions to be entitled to the benefits are the following: Concerning accidents at work, no minimum period of insurance is required. The accident must be declared by means of a medical certificate within 48 hours after the accident (24 hours after the 15

16 fatality). Accidents not resulting in incapacity for more than three days need not be declared. Claims must be made within three years. As regards as occupational diseases, no minimum period of insurance is required. The liability depends on periods given in the list (with a minimum of 6 months), but no periods of exposure to risk has been set. Claims must be made within 3 years. Occupational disease insurance is provided by a hybrid system, in the sense that the term occupational disease is held to include both the contingencies that are listed as such and any other ailment that the worker can prove to be causally related to his or her occupation. Recent legislation has extended this insurance protection to other categories of workers (managers, professional athletes, atypical workers, so called parasubordinati ), as well as to those engaged solely in domestic work ( housewives insurance ). A worker who suffers from an accident at work is entitled to medical assistance (i.e. an in kind benefit provided by the national health system) and cash benefits. In order to receive or continue receiving cash benefits the individual cannot refuse a treatment that is judged necessary, even if he/she is already receiving a pension. The National Institute for Insurance against Accidents at Work (INAIL) supplies, free of charge, prostheses to reduce the degree of disability, either ex officio or upon application. There are different types of cash benefits paid by INAIL that the injured individual or his/her survivors, in case of death may be entitled to. They include: compensation for total temporary incapacity; direct pension for permanent incapacity; transitional pension for silicosis and asbestosis; survivors pension and death grant; direct pension supplement; constant attendance allowance; special monthly allowance; endof-year bonus; prostheses and appliances; spa and thermal cures (hydrotherapy and mud baths) and treatments in health resorts; citations and decorations; out-patient care. The most relevant benefits cover: i) the permanent loss of working capacity; ii) the constant attendance; iii) the death; iv) the survivors. From the first point, INAIL grants a monthly allowance in compensation for permanent disability resulting from an accident at work or an occupational disease when it is assessed as exceeding a certain degree. Whereas up until recently, only the revenue consequences of the injury were compensated, since the year 2000 compensation is paid for any permanent damage to the victim s physical and mental integrity. INAIL now pays - in the form of a capital settlement if the damage suffered is assessed at between 6 and 15%, in the form of a life pension if the damage is at least 16% - compensation for the biological damage suffered. This is intended to compensate the worker for the reduction in his or her ability to perform those activities through which a person can express his or her personality (affective, social, political, cultural, religious, etc.). When the damage to the person s health is at least 16%, it is considered to also have an effect on his or her earning capacity, and so, in such cases, compensation is granted to cover the consequences brought about by income reduction as well as by worsened quality of life. The amount of the pension paid is calculated on the basis of the pay the person was receiving in the year before the date the accident occurred or the onset of the illness and it also depends on the degree of disability. Permanent incapacity pensions are adjusted annually. The degree of disability can be reassessed, ex officio or upon the worker s request, at any time during the first two years and at least annually afterwards. The application for review must be accompanied by a doctor s certificate. The amount of the pension is increased by one twentieth for each dependent child. The reference earnings for computing benefits differs among sectors and is as follows: Industry: Average earnings in the year prior to cessation of work depending on sector, included between 14, and 26, Agriculture: Fixed average of 21,818.23, except in special situations. The permanent annuity is increased by 1/20 for spouse and each dependent child (until age 18). As regards as the need of constant attendance, in case of permanent total incapacity, a monthly allowance is paid when a totally and permanently disabled person needs a carer s constant attendance to perform 16

17 even the most basic daily life activities (assegno di assistenza personale e continuativa). The monthly amount of this benefit in 2011 is This a monthly allowance is paid if this assistance is not directly supplied by the INAIL, by the hospital where the person is staying or by any other entity. This allowance is paid as a supplement to the disability pension. As regards as survivors pensions, the survivors of a worker who dies as the result of an accident at work or an occupational disease are paid a monthly pension calculated as a percentage of his or her most recent annual pay. These percentages are: i) 50% for the surviving spouse; ii) 20% for each child under the age of 18 (they are entitled to this pension until the age of 21 if they are in secondary education and 26 if they are at university); iii) 40% for each child if both parents are deceased; iv) 20% for each parent if they were dependent on the deceased at the time of his or her death, but only if the deceased left no surviving spouse or children; v) 20% for each brother or sister who was dependent on the deceased at the time of his or her death, but only if the deceased left no surviving spouse or children. Concerning death grants, INAIL pays a one-off death grant to survivors who can prove that they had to bear additional expenses on account of the death of the insured person following an accident at work or an occupational disease ( 1, for 2011). In case of an accident at work, the worker must notify the employer immediately. If the accident causes injuries that will take more than three days to heal, the employer must report it to INAIL within two days of becoming aware of the event. Fatal accidents must be reported within 24 hours. These benefits can be fully accumulated with new earnings from work, whereas beneficiaries of employment injuries pensions are not entitled to invalidity pensions (for the same reason). However, if the invalidity pension is higher than the employment injury benefit, the differential amount is paid (see section 2.4). Benefits are yearly indexed to the rate of growth of nominal wages in the industrial sector. The annuity for permanent incapacity is not subject to taxation, whereas the benefit for temporary incapacity is taxed by the usual rate of personal income taxation. 2.6 Sickness benefits The applicable statutory basis is based on Law No. 833 of 23 December 1978 instituting the National Health Service. Sickness benefits are provided through earnings-related benefits, according to a compulsory social insurance scheme for all employees. There is not a specific cash benefits, but these benefits are paid as a form of continuation of the compensation by the employer. Cash sickness allowance is a per diem allowance to replace pay lost due to sickness. It is paid starting from the fourth day of illness (the first three days are not covered, except in the case of relapses), and is paid for a maximum of 180 days per calendar year. Different criteria apply in the case of workers on fixed-term contracts. There are neither work period nor qualifying period required for being entitled to sickness benefits. Except for certain categories of workers, the benefit is paid directly by the employer and deducted from the amounts payable to the National Institute for Social Security (INPS) as insurance contributions. The allowance is generally equal to 50% of the person s pay for the first twenty days of illness, rising to 66.66% thereafter. Sickness benefits are taxed according the general rules applying to personal income. No death grant are provided. Workers are entitled to sickness cash benefits if a doctor sends the certificate to INPS electronically and gives a copy to the worker. Hence, the employee s doctor must deliver a medical certificate in an electronic format to the employer, who can decide to proceed to any control. If a check is carried out and the worker s absence is found to be unjustified, she/he forfeits the whole of his or her sickness benefit 17

18 entitlement for a maximum period of ten days, and 50% for the rest of the period if she/he is absent again. No compensation is paid for days lost because of a delay in delivering the doctor s certificate. 2.7 Maternity and paternity benefits The applicable statutory basis is based on: Law No of 30 December 1971 on the protection of working mothers; Law No. 903 of 9 December 1977 on equal treatment between men and women; Law No. 53 of 8 March 2000 on provisions for maternity and paternity support; Legislative Decree No 151 of 26 March 2001 on protection in case of maternity and paternity. The maternity/paternity benefit is provided through a compulsory social insurance scheme for employees with earnings-related benefits. Employed women or, in some cases, fathers are obliged/entitled by law to a paid maternity (paternity) five-month leave before and after delivery. As a rule, pregnant female employees are entitled to maternity benefits through a paid leave. Actually, they are obliged to stop working for two months before the estimated date of childbirth and three months after the effective date of childbirth. Alternatively, they can choose to stop working one month before delivery and four months afterwards, conditional upon their doctor s consent. Under certain circumstances, benefits are also paid to fathers who are working instead of the mother (e.g. death or serious illness of the mother, abandonment etc.). Female self-employed and professionals as well as parasubordinate workers enrolled to the Gestione Separata are not obliged to stop working. Benefits are also paid to workers who adopt children or who act as foster parents to children under the age of 6 (or 18 in the case of cross-border adoption or foster care before adoption) for a maximum of three months. During the mandatory period of maternity leave, the compensation paid is 80% of pay. The INPS also pays self-employed women (farmers, sharecroppers, tradespersons and shopkeepers) a direct per diem maternity benefit for two months before the estimated date of childbirth and three months following the actual date of birth. These said benefits are generally paid directly by the employer and deducted from the sums due to the National Institute for Social Security (INPS) for contributions. Concerning parental leave, both parents (who are in paid employment) are entitled to a total period of up to eleven months paid leave until a child is 8 years old, at the same time if they wish. This is also available to parents of adopted and foster children. Fathers can take leave even while the mother is on mandatory maternity leave or nursing leave. Mothers who are self-employed are also entitled to parental leave, but only for three months during the child s first year. If they take this leave, they must stop working during that time. The parental leave is covered with a compensation amounting to 30% of pay or of standard pay and is payable for an overall maximum, for both parents, of six months in the child s first three years (for adopted and foster children, the first three years that the child is with the family). Once the six months have elapsed (and until the child s 8th birthday), a parent can be entitled to compensation if his or her individual income is no more than two and half times the amount of the minimum retirement pension paid at the time. Applications for both maternity and parental leaves are to be addressed to both the employer and to the INPS. If the application for benefit is in respect of nursing leave, it has to be only addressed to the employer and accompanied by a relevant certificate issued by the child s GP as well as by a declaration under own responsibility that the child s other parent is not benefiting from the same kind of leave at the same time. Maternity/paternity benefits are taxed according the general rules applying to personal income. 2.8 Unemployment benefits 18

19 The applicable statutory basis is based on: Law No. 427 of 6 August 1975; Law No. 160 of 20 May 1988; Law No. 223 of 23 July 1991; Law No. 80 of 14 May 2005; Law n. 92 of 28 June Compulsory social insurance scheme for employees are financed by contributions from employers, providing earnings-related benefits. No special unemployment assistance scheme exists, nor means tested unemployment benefits. There is no possibility of voluntary insurance. Self-employed and parasubordinate workers are not covered by the unemployment benefit system (apart from a means tested benefit provided to same, very small, categories of parasubordinate workers). Ordinary unemployment benefit is a form of compensation paid to workers who have been dismissed. To be eligible for this benefit, you must have been insured with the National Institute for Social Security (INPS) for at least two years and have accumulated at least 52 weeks of contributions in the two years preceding the cessation of your employment. Workers with less than 52 weeks of contributions in the two preceding years but who have worked for at least 78 days in the previous year or who have been insured for at least two years and had accumulated at least one week of contributions before the two years preceding their application, are generally entitled to a reduced requirements unemployment benefit for a number of days equal to the number of days actually worked in the preceding year and for a maximum of 156 days. This benefit is also paid to workers who have been suspended by companies affected by temporary events for which neither the employees nor the employer are responsible. It is not paid to workers who resign voluntarily, unless for what is assessed as being a good reason. Any worker who, without notifying the competent INPS office, engages in gainful employment while receiving an unemployment allowance, loses his or her right to benefits. The employer who hires a worker on unemployment benefit is also responsible for notifying it to the competent INPS office. Periods of suspension for which unemployment compensation is authorized are taken into account for pension entitlement. Other unemployment benefits include allowances paid to Italian workers who repatriate to Italy from non- EU countries and the special unemployment allowances for laid-off construction workers. Special rules apply to farm workers. Ordinary unemployment benefit is paid for a period of 240 days (8 months). This can be extended to a maximum of 360 days (12 months) for persons over the age of 50. Workers who have been suspended can receive unemployment benefit for a maximum of 65 days. Workers who have been suspended receive 50% of pay. The amount of the benefit is equal to 60% of the person s pay in the three months preceding the cessation of employment (50% from the seventh month of benefit payment and 40% from the ninth), within the limits of a maximum gross monthly amount fixed by law. For 2011, this amount is , rising to 1, for workers whose gross monthly pay is over 1, Persons receiving unemployment benefit are paid family allowances under the same conditions as those in work. Reduced requirements unemployment benefit is paid (lump sum) for a maximum of 180 days, according to number of working days before the fire. The replacement rate is 35% for the first 120 days and 40% for the next 60 days. In certain conditions a mobility allowance (indennità di mobilità) may be paid to workers who have been laid off and cannot be placed and for those made redundant because of downsizing or closure. The minimum duration of this allowance is 12 months, rising to 24 months for workers over the age of 40 and 36 months for those over 50. In Southern Italy, these periods are extended for a further 12 months and, in certain cases, until the person is entitled to the old-age and retirement pension. The mobility allowance is granted only to workers in certain production sectors (industrial firms with at least 15 employees and services firms with at least 50 employees) where companies are included in a redundancy pay program due to the fact that they are undergoing a crisis. The replacement rate of this benefit is 80% in the first year and 64% afterwards. Periods of mobility compensation are taken into account for pension entitlement and the 19

20 amount of the pension. A person receiving this allowance can work part-time or for short periods without losing his or her right to this compensation, which is suspended for the days when s/he is actually working. In Italy too two schemes of redundancy payments exists (ordinary and extraordinary). The ordinary compensation paid by the income supplement fund (Cassa Integrazione Guadagni) and authorized by the local provincial committees is intended for employees and managers of industrial enterprises in general and of industrial and craft enterprises in the construction and stone-quarrying sector, when they are affected by a reduction or stoppage of activity for temporary difficulties for which neither the management nor the workers are responsible or that are a result of temporary market conditions. The extraordinary redundancy pay authorized by decree of the Ministry of Labour is intended to preserve the income of employees of industrial enterprises (including those in the construction and stonequarrying sector and contractors for catering and cleaning services) which have cease operations for restructuring, reorganization or conversion, or owing to a business crisis, bankruptcy, preventive composition or compulsory liquidation. This also applies to commercial enterprises, shipping and transport companies, and travel and tourism agencies with more than fifty employees excluding apprentices and persons hired on training contracts and security firms. The condition for eligibility is that these businesses have had an average of 15 employees over the six months preceding the application for benefit. This allowance cannot be paid for more than 18 months for bankruptcy proceedings, 12 months for business crises and 24 months for restructuring, unless extended as provided by law. The amount of the ordinary and extraordinary redundancy pay is 80% of the total pay the worker would have been entitled to for the hours of work not worked. The ordinary and extraordinary allowances are capped at a monthly maximum which is revised annually. All unemployment benefits are claimed at and paid directly by monthly cheque by the INPS, apart from the reduced requirements unemployment benefit which is paid lump sum the year following the firing. The ordinary unemployment benefit claim has to be addressed to the competent INPS office within 68 days of being made redundant. The claim for the mobility allowance also has to be addressed to the competent INPS office and the relevant application form has to be lodged at the local employment office (centro per l impiego) within 68 days of being made redundant. The claim for the ordinary redundancy pay has to be lodged by the employer to the competent INPS office within 25 days of cessation of the salaried work and the benefit falls due as of the week the work suspension or reduction started. The claim for the extraordinary redundancy pay has to be lodged by the employer to the Ministry of Labour and Social Policies within 25 days of cessation of the salaried work and the benefit falls due as of the week the work suspension or reduction started. Unemployment benefits cannot be accumulated with earnings from work nor with other cash allowances, i.e. sickness allowance, invalidity pension and personal pensions. Unemployed can choose between the benefit and the disability pension where they are entitled to both benefits. Unemployed persons can receive an additional allowance for family charge (assegni familiari) upon request. The benefit payment can be suspended in case of voluntary unemployment (refusal of an appropriate job) or in case of refusal to attend recycling training. Benefits are subject to taxation under the general taxation rules. There are no special relief for benefits. Unemployment benefits are financed by a contribution rates of 1.61%, paid by the employer. Ordinary earnings supplement (Cassa Integrazione Guadagni, CIG) is financed by a 2.20% contribution rate paid by employers and levied only in industry). Extraordinary earnings supplement (Cassa Integrazione Guadagni Straordinaria, CIGS) is financed by a 0.90% contribution rate (of which 0.30% paid by the employee), levied in commerce and industry. In construction industry the contribution rate for CIG is 5.20%, paid by the employer, for CIGS is 0.90% (of which 0.30% paid by the employee). The reform currently under discussion in the Parliament provides for the abrogation of the mobility allowance and a variation of duration and generosity of unemployment benefits. The ordinary unemployment benefit should be replaced by a new benefit, called ASPI (assicurazione sociale per 20