State pensions and mandatory schemes


Do employers and/or employees make pension contributions to the government in your jurisdiction? If so, briefly outline the existing state pension system.

Italian law provides for a system of obligatory pension insurance for:

  • public and private employees, self-employed workers collaborators managed by the National Social Security Institute (INPS); and
  • categories of self-employed worker (eg, lawyers and engineers) managed by private social security insurance institutes.

Decree-Law 201 of 6 December 2011, as amended by Law 214 of 22 December 2011 (the so-called ‘Fornero reform’), reformed the public obligatory pension insurance managed by the INPS. Under the decree-law, access to benefits was established through the old-age pension and the early old-age pension.

Old-age pension

The old-age pension is provided – on request – to employees and self-employed workers who are registered:

  • with the general obligatory insurance system;
  • with another pension scheme available to certain categories of employee which:
    • acts as a substitute to the general obligatory insurance system; or
    • exonerates the employee from the general obligatory insurance system or subjects him or her to it in addition to another system; or
  • under the so-called ‘INPS separate management pension scheme’.

However, in all of these cases, the individual must meet the following requisites.

First contribution from 31 December 1995

Since 1 January 2012 anyone whose first contribution seniority dates back to 31 December 1995 can claim an old-age pension if their contributions have been recognised and they have accrued at least 20 years of contributions, regardless of whether they have actually been paid or accredited on any other grounds.

For 2018 to access the old-age pension, individuals must meet the following age requirements:

  • public employees (both male and female) – 66 years and seven months; and
  • self-employed workers (both male and female) – 66 years and seven months.

In 2019 this age requirement will become 67 years.

First contribution from 1 January 1996

Since 1 January 2012 anyone whose first pension contribution dates back to 1 January 1996 can claim an old-age pension provided that:

  • they have accrued 20 years of contribution seniority and meet the age requirements set out above; and
  • the pension is at least one-and-a-half times above the minimum social security pension amount (the so-called ‘threshold amount’).

If these conditions are met, once an individual reaches 70 years old and provided that contributions have been effectively paid for five years (obligatory or voluntary payments or by redemption) – excluding contributions not actually paid but accredited on any grounds – he or she will have access to the pension, regardless of its amount. This age requirement is currently 70 years and 7 months.

In 2019 the age requirement will become 71 years. The age requirement may be further increased in 2020 based on adjustments to the average life expectancy.

Early old-age pension

This pension is issued to employees registered with the general obligatory insurance scheme, with special schemes for self-employed workers (eg, crafters, small traders and farmers) and those registered under the INPS separate management pension scheme. This pension will be issued only if the contribution requisites are met, regardless of the beneficiary’s age.

Until 31 December 2018, to be eligible for the early old-age pension a person must have accrued:

  • 42 years and 10 months of contributions (for male workers); and
  • 41 years and 10 months of contributions (for female workers).

From 2019, a person must have accrued:

  • 43 years and 3 months of contributions (for male workers); and
  • 42 years and 3 months of contributions (for female workers).

The requisites are applied to all employees, both self-employed workers and public employees.

As of 2020 a further adjustment based on the average life expectancy is likely.

Early old-age pension of precocious workers

Article 1(199) and following of the 2017 Budget has introduced the possibility for workers who began working before they were 19 years old to claim a pension, the contribution requisite of which is lower than that of the early old-age pension.

In 2018 these individuals can obtain the early old-age pension if they have accrued 41 years of contributions.

Starting from 1 January 2019 individuals will need 41 years and 5 months of contributions.

This requirement is subject to the normal adjustment according to the average life expectancy, which has been applicable since 2010.

Advanced pension (APE)

This pilot programme was introduced by the 2017 Budget (Article 1(166) and following of Law 232/2016), which – from 1 May 2017 until 31 December 2018 – allows a person who is at least 63 years old to opt for early retirement and obtain a pension. This programme applies to employees (included public employees) and self-employed workers insured by a special pension scheme (eg, crafters, small traders and farmers) or by the INPS separate management pension scheme. Those insured by the pension funds for professionals are excluded.

The programme is carried out via two instruments:

  • Voluntary APE – implemented by way of loans from banks and insurers, which are issued through INPS. Once awarded a pension, beneficiaries must repay the loan in continuous instalments for the next 20 years, with relative interest.
  • ‘Social’ APE – this consists of a subsidy issued by the state to four categories of workers deemed worthy of this special protection – in particular:
    • the unemployed;
    • the disabled;
    • caregivers; and
    • workers who perform one of the 11 occupations listed in the annex to the Budget Law (so-called ‘heavy’ work).

The difference between the two instruments lies mainly in the fact that social APE is a public subsidy and thus the beneficiary is not subject to any negative effect. On the other hand, with voluntary APE, the beneficiary will be subject to a reduction in his or her pension, depending on the advanced requested by the financial intermediary that granted the loan.

The government is currently still assessing whether to extend APE for 2019 and for future years.

Pension provision

Pension amounts are determined on the basis of two models: one regarding remuneration and the other contributions.

In the remuneration-based model, pensions are provided in proportion to the remuneration received in the last years of employment. The financial sustainability of the system mainly depends on a balance between active workers and pensioners.

Over the years, the continuous ageing of the Italian population, together with birth rate trends, have plunged the remuneration model into crisis, leading to a revision of the same.

Law 335 of August 1995, entitled the reform of the obligatory and supplementary pension system (the so-called ‘Dini’ reform), introduced the calculations-based system. All those who registered for the first time on 1 January 1996 or later fall under this system.

Under the contribution model, pensions are directly linked to the contributions that have been paid. The contributions paid in (the so-called ‘capital sum’) are converted into an income according to the transformation coefficient, which are calculated according to the person’s age, when the pension was granted and life expectancy.

With the introduction of the Fornero reform, the contribution-based model was extended to those whose pensions were based on the remuneration model (as long as they were registered by 31 December 1995).

Can employers deduct any state pension contributions from their taxable income?

Article 95(1) of Presidential Decree 917/1986 states that when a company's income is calculated, the costs for salaries, wages, social security contributions, allocations for retirement and pension funds and donations in cash or kind are recognised as negative components.

Are there any proposals to reform or amend the existing system?

Although its provisions are still to be discussed in Parliament, the 2019 Budget Law is expected to amend the pension system and introduce the following systems:

  • ‘Quota 100’ – which provides the opportunity for an individual to retire if the sum of their age and their years of paid contribution equals 100 years.
  • ‘Quota 42’ – which provides the opportunity for an individual to retire, regardless of their age, if they have made 42 years of paid contributions.

Other mandatory schemes

Are employers required to arrange or contribute to supplementary pension schemes for employees? If so, briefly outline how the scheme is enforced and regulated.

Supplementary pension schemes were introduced by Legislative Decree 252 of 5 December 2005 with the purpose of supplementing the obligatory basic pension and thus contributing to an adequate level of protection for workers, together with the benefits guaranteed by the public system.

The supplementary pension is based on a system of financing with capitalisation. Within this system, every subscriber has an individual account into which contributions are made. These contributions are then invested in the financial market (eg, in shares, government securities, bonds and investment funds) by specialised private managers. Over time, these contributions will produce a variable yield, depending on market trends and management choices.

On retirement, the beneficiary will be paid an income, even in the absence of a pension deriving from the public social security system. If he or she has a pension which comprising contributions paid, this income will be paid in addition.

Everyone (eg, private and public employees, collaborators, self-employed workers and professionals) can voluntarily join a supplementary pension scheme.

Supplementary pensions are at the beneficiary's expense and, in the case of an employee, partly at the employer's expense.

Employees can supplement their contributions by allocating severance indemnity contributions to the pension fund.

Occupational pension schemes

Types of scheme

What are the most common types of pension scheme provided by employers for their employees in your jurisdiction?

There are three main types of pension scheme in Italy that constitute the ‘second-pillar’ system, in contrast to the first pillar (ie, the National Security System):

  • Contractual pension funds – these are independent legal entities set up through collective bargaining agreements (CBAs) between employers’ associations (or by each single employer) and trade unions. Membership is open only to employees that meet the conditions set out by the agreement (eg, employees in the metalworking and plant installation industry or employees in the bank sector).
  • Open pension funds – these funds are promoted by companies in the financial sector (eg, banks, brokerage, savings management, investment fund management and insurers) as a specific, separate and autonomous asset. Open funds are not independent legal entities, but resources received by members that have special status, as they are legally separated from the entity which manages the fund and, as such, cannot be subject to enforced execution by the sponsor company’s creditors. Beneficiaries of these funds are not limited to a particular group of person or employees. Enrolment in these funds can be on an individual or collective basis.
  • Old pension funds – these are private voluntary retirement funds which were already in operation when Decree 124/1993 (ie, the first law which set structured private pensions) entered into force. They are operational funds which are structured as defined contribution and benefit schemes.

In addition to pension funds, a 'third-pillar' system allows for individual pension schemes (PIPs), which are implemented through individual membership to an open pension fund or life insurance contract. PIP assets are separate and autonomous within the same company. The beneficiaries of these funds are not limited to a particular group of persons or employees – even if they are at the executive level. Further, these funds are open not only to employees, but to any natural person.

Statutory framework

Is there a statutory framework governing the establishment and operation of occupational pension plans?

The private pension schemes under the second and third pillars are regulated by the Supplementary Pensions Act (Law 252 of 5 December 2005).

The Supplementary Pensions Act sets out:

  • the pension funds requirements;
  • the financing rules;
  • tax privileges;
  • pension benefits (defined benefit schemes and defined contribution);
  • protections for early leavers;
  • the contribution due on supplementary contributions;
  • the powers of the supervisory authority on supplementary pension schemes (COVIP); and
  • the penalties if the fund disrupted.

In addition to the act, pension schemes are subject to the bylaws on pension funds and the regulations issued by COVIP (an independent administrative authority tasked with monitoring the functioning of the pension fund system). CBAs usually regulate the amount of contributions due from employers and employees (in contractual funds).

What are the general rules and requirements regarding the vesting of benefits?

Italian supplementary pension schemes are based on the principle of defined contributions, which means that the amount of pension benefits relate to employer and employee contributions and increase by investment returns.

The Supplementary Pensions Act sets out the requirements and arrangements for accessing supplementary benefits. According to the act, once an individual has participated in a supplementary pension scheme for at least five years (this term is reduced after three years if the employment relationship ceases for a reason other than the acquisition of a supplementary pension and the employee moves to another EU member state), he or she will have full rights to their pension benefits on meeting the requirements set out in the National Security System for old-age pensions paid by the National Social Security Institute (INPS).

Once these requirements are met, employees can receive:

  • a life annuity;
  • pension benefits partly in the form of annuity and partly in the form of capital, up to a lump sum of 50% of the amount collected; or
  • the entire amount as capital if the life annuity arrangement corresponds to 70% of the pension benefit and interest is less than 50% of the social pension.

In accordance with the Supplementary Pensions Act, employees can liquidate their entire pension if:

  • they experience a permanent disability; or
  • they are no longer required to participate in contractual funds.

There are specific rules for:

  • individuals who retire early for health reasons;
  • first-time house buyers; and
  • individuals who are unemployed for more than 24 months and have less than five years (which can be raised to 10 years depending on the bylaws of the funds) to reach the requirements set out in the National Security System for old-age pensions paid by the INPS.

There are further rules for those who cease to work and mature their seniority for the old-age pension within the next five years, provided that they have completed 20 years of contribution to the mandatory regime to which they belong. In these cases, the benefits of supplementary pension schemes can be paid, in whole or in part, at the request of the member in the form of a temporary annuity, in a so-called ‘temporary early supplementary income’ (RITA).

RITA is due from the moment of the request until the age required for the old-age pension and consists in the fractional distribution of a capital for the period considered equal to the accumulated amount requested.

In brief, to obtain RITA an individual must:

  • cease their employment relationship;
  • reach the requirements necessary to receive the old-age pension in their mandatory regime within the next five years or to be unemployed for more than 24 months;
  • have completed 20 years of contribution to their mandatory regime; or
  • have completed five years in the pension scheme.

It is up to the individual to establish how much of the accrued contributory amount to use as RITA.

What are the general rules and requirements regarding the funding of plan liabilities?

Funding is based on the contributions made by the employer and employee, as well as annual severance pay (severance indemnity contributions).

Even if employees can access contractual funds, the Supplementary Pensions Act requires them to decide within six months of hire whether they want to use their severance indemnity contributions (that can be used totally or in part, depending on what is established in the CBAs) to finance their pensions (in the absence of a specific indication, the severance indemnity is fully devolved).

If employees opt to use their severance indemnity contributions, they cannot change their minds until their termination; employees are entitled to modify the amount of their contributions only up to the maximum limit fixed by the CBA. If there is a delay in providing an employee with an explicit option, these contributions will be put in the CBA-established fund used by the company or, if no such fund exists, into a specific INPS-managed fund (FondInps).

Article 1(173-176) of Law 205/2017 is expected to repeal the use of FondInps. The existing contribution positions will be transferred to an already existing and operating pension fund, which will be identified by a specific ministerial decree. So-called ‘silent’ employees will also be enrolled in such a fund.

Irrespective of any severance indemnity contributions, pension schemes are funded by contributions paid by the employer and employee. The contribution amount is established by the relevant CBA or by the fund’s bylaws. Supplementary contributions are allowed.

New rules have recently been defined for the allocation of employer contributions to the ordinary methods of financing supplementary pensions. These contributions must be paid into the pension fund identified by the CBAs or, for employees already participating in supplementary pension schemes, to the fund where the employees are registered. With reference to employees who are not enrolled in supplementary pensions and, therefore, do not yet pay anything (neither ordinary contributions nor severance) employers must pay any contractual contribution to the pension fund specified by the CBAs, even without the employee’s registration. If the employee subsequently decides to join another fund, they can make a transfer to their chosen fund.

What are the tax consequences for employers and participants of occupational pension schemes?

Employer contributions to private pension schemes are considered as employment income and subject to tax and social security contributions (a specific rate is applied). For tax purposes, employees can deduct contributions paid up to a limit of €5,164.57.

The Supplementary Pensions Act has introduced some compensatory measures in favour of companies – in particular, the right to deduct from the enterprise annual income an amount equal to 4% (6% for companies with fewer than 50 employees) of the value of the sums accrued as severance indemnity contributions for the purpose of financing complementary pension schemes. There is also an exemption from the payment of the contribution due to the guaranteed investment fund for severance indemnity contributions in the same percentage as the provision for supplementary pension forms.

Is there any requirement to hold plan assets in trust or similar vehicles?

Italian pension schemes are contractual. They consist of individual contracts between the fund (either contractual, either open) and members, where the fund is responsible for administering the pension scheme.

For the purpose of its operation, the pension fund identifies a financial manager who stipulates conventions focused on the management of the fund's assets. Contributions are invested in secure vehicles provided for by law and managed through:

  • agreements with insurers or with asset management companies;
  • subscription or acquisition of shares of real estate companies;
  • units of closed-end mutual real estate funds; or
  • the subscription and acquisition of shares in closed-end mutual funds.

The law requires that a depositary bank keeps the assets in custody and conducts trading activities following the instructions given by the financial manager in accordance with the provisions of law, bylaws and circulars issued by COVIP.

Are there any special fiduciary rules (including any prohibited transactions) in relation to the investment of pension plan assets?

The pension funds’ members must be made aware of the level of the risk to which they are exposed. For this reason, financial managers must comply with the risks profile defined by the fund with an approach of prevention. Following the rules defined by COVIP, fund must provide their members with information regarding the investment choices and prepare a specific document on the objectives and criteria of their investment policy, including:

  • the methods of measuring risk and their investment risk management techniques; and
  • the strategic breakdown of assets in relation to nature and the length of the pension benefits due.

This document is reviewed every three years and made available to pensioners and beneficiaries of the pension fund.

It has also been ruled that in all cases of tacit transfer of an employee’s severance indemnity contributions to retirement funds, pension funds may invest sums received only in more prudent investment terms that offer returns and a return guarantee of comparable capital at the revaluation rate of the severance indemnity contributions.

Is there any government oversight of plan administration and/or insurance coverage for plan benefits in the event of an employer’s insolvency?

COVIP controls the technical, financial, asset and accounting management of complementary pension schemes. If the scheme is underfunded because of financial problems qualified as serious, COVIP should evaluate possible solutions and measures, which will be determined by financial managers.

In the absence of adequate assets to pay retirement benefits, COVIP may limit the availability of assets.

Directive 80/987/EEC of 20 October 1980, as amended by Directive 94/08 EC, protects employees in the event of insolvency of the employer.

In particular, if an employer becomes insolvent, the employees can ask the INPS to intervene using the guarantee fund. This fund protects employees when an insolvent employer fails to pay contributions to private pension schemes, or only pays a portion therein.

In particular, the fund ensures:

  • the employer’s contribution;
  • the employee’s contribution which the employer has failed to contribute; and
  • the portion of severance indemnity contribution transferred to the fund which the employer has failed to pay.

In addition, the fund reassesses the contributions paid by using the performance indemnity index for each year.

The guarantee fund will pay the amount of contributions directly omitted to the supplementary pension scheme in which the contributory omission has occurred or where the employee has subsequently transferred. Therefore, there is no direct payment to employees.

In the event of dissolution of the fund, because of the insolvency of the subjects bound to the contributions, members who already receive a pension have insurance protection. Other members can instead liquidate the amount that they have accrued or transfer it to another supplementary pension scheme.

Are employees’ pension rights protected in the event of a business transfer?

If a business is sold or transferred to a new legal entity, existing employment relationships, together with all of the related rights and obligations, automatically transfer to the acquiring party, pursuant to Article 2112 of the Civil Code.

In these cases, if an employee who works in the transferred business is enrolled in a contractual fund and both the transferor and the transferee apply the same collective agreement, the transferee and the employee will continue to pay contributions. On the contrary, if the employers apply a different collective agreement – unless otherwise agreed with the relevant trade unions and unless the bylaws of the seller’s supplementary pension fund allow the maintenance of the status of partner – employees cannot participate in the previous pension scheme and must choose the one linked with the transferee or any other kind of supplementary scheme in order to continue financing their individual position.

If an employee is a member of an open fund, an individual pension plan or an old pension fund which he or she has accessed independently of any collective agreement, he or she will continue paying contributions to it.

Deferred compensation agreements

Deferred compensation plans

Do any special tax rules apply to these types of arrangement?

If the deferred remuneration is paid when the employment relationship is still in force, it is included in the current payroll. Tax and contribution are applied on both the ordinary salary and the deferred compensation which is paid during the same month. The lump sum can determine an increase of the overall annual tax rate.

If the amount is paid after the end of the employment relationship, the tax rule is favourable for the employee. In this case, the amount is taxed separately and with a lower rate. No contribution is due. The deferred compensation is not considered in the calculation of the ordinary annual incomes of the employee and the tax rate applicable on the latter incomes is not influenced by the payment of such a deferred remuneration.

Do these types of arrangement raise any special securities law issues?

As the deferred compensation is a part of the remuneration, no special securities laws apply.

Equity-based incentives

Share options

What are the most common types of share option plan in your jurisdiction? Please outline the rules relating to each scheme.

Stock option plans are the most common share option plan in Italy. A stock option plan grants employees the right to purchase shares in the employer or its related company at a specified price (exercise price). Directors can also be recipients of such plans.

The few general rules governing the equity-based incentive plans are set out in the Civil Code. In particular, pursuant to Article 2349(2) of the Civil Code and the company’s bylaws, an extraordinary shareholders meeting may approve the assignment of financial instruments, other than shares, to workers employed by the company or any controlled company. The Civil Code sets out specific rules regarding the exercise of the attributed rights, the right of transfer and grounds for disqualification or redemption.

Listed companies, insurers and credit institutions are subject to further mandatory requirements.

More specific rules govern the fiscal and social security aspects.

What are the tax considerations for share option plans?

The difference, if any, between the share value at the time of exercise of the option and the exercise price paid by the employee is fully taxed as employment income.

If the purchased shares are resold, any capital gain will be taxed as income arising from sale of shareholdings with a 12.5% rate.

Any employment income from stock option plans is exempt from social contributions.

Share acquisition and purchase plans

What are the most common types of share acquisition and purchase plan in your jurisdiction? Please outline the rules relating to each scheme.

Stock purchase plans are uncommon in Italy. Such plans entitle employees to purchase shares of the employer at a specified price over a fixed period.

The use of stock grant plans is fairly infrequent due to its limited fiscal benefits. Such plans provide for free allocation of shares to employees, establishing specific rules – particularly with regard to the right to transfer the shares.

The Civil Code does not provide overall requirements for the transfer of shares to employees. However, there are few provisions supporting the acquisition of shares by employees.

In accordance with Article 2349(1) of the Civil Code, if allowed by the company’s bylaws, an extraordinary shareholders meeting may approve the assignment of dividends to workers employed by the company or by any controlled company through the issue, in an amount corresponding to such dividends, of special categories of share, to be individually distributed to the employees.

Further, Article 2358 of the Civil Code allows a derogation from the prohibition on making loans or providing security with a view to the acquisition of company’s shares by a third party in order to facilitate the acquisition of shares by employees. Under Article 2441 of the Civil Code, the shareholders meeting may also exclude the right to pre-emption in cases of newly issued shares that are offered to workers employed by the company or by any parent or controlled company.

Specific rules govern the fiscal and social security aspects

What are the tax considerations for share acquisition and purchase plans?

The value of the shares distributed free to the employees is not included as employment income if:

  • the shares are offered to all employees in general or to all employees belonging to certain categories;
  • the total value of the distributed shares does not exceed £2,065.83 within a fiscal period (any surplus will be subject to taxation); and
  • the shares are not repurchased by the employer or issuing company or divested anyway for at least three years after their award.

A social contribution exemption scheme is provided for any free allocation of shares to employees arising from share plans as long as such plans are intended for employees only (or for categories of employees only) and provide for free distribution of shares under certain conditions.

Phantom (ie, cash-settled) share plans

What are the most common types of phantom share plan used in your jurisdiction? Please outline the rules relating to each scheme.

Some companies prefer to introduce incentive-based compensation without distributing shares to employees. Phantom share plans require no approval by the shareholders meeting since they grant a cash incentive compensation to only some employees, based on the increase in value of a hypothetical number of shares.

The most common phantom share plans usually include the theoretical assignment of a certain number of shares to the employee setting the objectives to be achieved within a specified period. The value or the increase in value of the assigned shares at the end of such period results in the amount of the cash incentive to pay to the employee.

Listed companies, insurers and credit institutions are subject to mandatory requirements for incentive compensation.

The lack of any tax or social security benefit does not provide an incentive to use phantom share plans.

What are the tax considerations for phantom share plans?

Any income from phantom share plans is fully subject to taxation and social contributions as employment income.


Are companies required to consult with employee unions or representative bodies before launching an employee share plan?

Employee share plans are not subject to any disclosure or consultation requirements. However, union agreements may be used to regulate specific remuneration by means of a share plan contained in the collective agreements.

Health insurance

Provision of insurance

What is the health insurance provision framework in your jurisdiction? For example, is it provided by the government, through private insurers or through self-funded arrangements provided by employers?

In Italy, the minimum coverage levels for healthcare (eg, specialist care and hospital admissions) are guaranteed by the state.

The Italian healthcare system is accessible through the National Health Service: all Italian citizens and all foreigners resident in Italy (possessing residency permits) must be registered with the National Health Service.

Coverage levels

Do any special laws mandate minimum coverage levels that must be provided by employers?

Under Article 38 of the Constitution, all employers must enroll their employees in the National Insurance System in case of work accidents.

This form of compulsory insurance is managed by the National Social Security Institute and the National Institute for Occupational Health Insurance and Occupational Diseases.

This compulsory insurance is largely funded through employer contributions, with employees contributing a smaller portion.

Some collective agreements provide that the employer should offer supplementary healthcare coverage to their employees through their enrolment in special assistance funds (funded largely by employer contributions).

Can employers provide different levels of health benefit coverage to different employees within the organisation?

Yes, there is no principle of equal treatment in the Italian legal system.

Some collective agreements provide for different levels of supplementary healthcare coverage on the basis of employees’ classification (higher levels of coverage for executives and lower levels for other employees).

Post-termination coverage

Are employers obliged to continue providing health insurance coverage after an employee’s termination of employment?

No, unless so provided in the collective agreement provide. Some collective agreements rule that, in the event of termination of the employment relationship before 31 December, the insurance coverage should be guaranteed until the end of the calendar year.