PENSIONS IN ITALY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83-00423R001300300002-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 20
• Document Creation Date: November 9, 2016
• Document Release Date: March 10, 1999
• Sequence Number: 2
• Publication Date: December 1, 1953
• Content Type: REPORT

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 FENSICNS IN ITALY
December, 1953
I LA.DIL I1 7
lea 6;
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JOHN ALDEN ToWERs
CHARLES G.PERRIN
H. WALTER FORSTER
IWAN* ARTHUR U.CROSIIY
HAROLD R WEAVER
WALTER ILWEST,JR.
JOHN K. DYL"R,JR.
J. H.SHREINER
TOWERS, PERRIN, FORSTER & CROSBY, INC.
12 SOUTH 12TH STREET
PHILADELPHIA 7
230 PARK AVENUE
NEw YORK 17
CONSULTANTS
PHILIP E. BE NJAMIN
ROGER C. BROWN
EDWIN M?BUsu,JR.
F. W. COLEMAN, JR.
RIOHARD H.FORSTER
GEORGE G. FOUST, JR.
ANNA M. KELLY
W. THOMAS KELLY
CHARLES S. MANNING
BuDOE B.MOCONNELL
M VALENTINE MH.LER,JR.
ALAN W.MYERS
PAUL V. O SBORNE
CHARLES D. Ro OT, JR.
WARREN F. SEUDEL
RIcRAnD LYAEE
38 S. DEARTIORN STREET
CHICAGO 3
December, 1953
PENSIONS IN ITAjY
The attached report is based upon field work done in Italy in
June of this year by our Director and former President, Mr. H. Walter
Forster. Conferences were held with executives of Government agencies,
insurance companies, corporations, and. with consulting actuaries. In
every instance, all possible help was given us, and several of the men
interviewed were good enough to review a first draft of our report to in-
sure the final draft being accurate as of September 1, 1953.
The purpose of this report is to give our clients a fairly condensed
picture of what the national pension system provides, what employers are
doing to supplement that system, and the tax status of both public and
private pension plans. Naturally, if such a plan is to be installed, or an
existing plan modified, up-to-date and more complete information must be ob-
tained on the ground. This is particularly important, as pensions have re-
cently been greatly liberalized in Italy and further changes are possibilities.
Part 7s Tax Status Of Corporations And Individuals 15
To the best of our ability, we shall be glad to answer questions
raised by the readers of this report.
The organization of this report is as follows:
Part 1: General Summary
Part 2: Employee Data
Part 3e National Pension System
Part 4m Special Employment Provisions
Part 5: Total Employer Contributions
Part 6: Private Pension Plans
Very truly yours,
JOHN ALDEN TOWERS
President
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PENSIONS IN ITALY
CPYRGHT
PART 1 :_GENERAL SNMMARY
1. Italy has had a national pension system since 1919. It was revised
radically in 1952 to bring pensions more nearly into accord with present con-
ditions. Separate and differing Government sponsored pension plans protect
various groups of Government employees and also groups of private employees in
stipulated fields. While the national system covers but a fraction of the work-
ing population (8,088,000 contributors at the end of 1948), mote than 2,000,000
pensions are now being paid under this system alone.
2. The present average annual pension paid under the national system is
L. 83,000, or about 9133 at the standard rate of exchange, as against average
industrial earnings of workers of L. 1,077 per day and of staff of L. 44,318 per
month. Pensions are paid as a matter of right. Employment after the normal re-
tirement age of 60 for men and 55 for women is encouraged, both by paying them
75% of the pension and by increasing the eventual pension. The national system
pays a minimum pension of L. 45,000 per year from age 60/55 and a minimum of
L. 65,000 from age 65, or earlier invalidity,
3. Pensions are provided for invalidity, for widows and orphans, and
for dependent parents.
4. Private pension plans of a formal, announced type appear to be relat-
ively rare, although it is believed that many employers have in the past supple-
mented the national pension in an informal manner, and that some are today doing
so, in spite of the liberalization under the 1952 law. Pensions have apparently
not been a matter of negotiation with unions in the industrial field. Two
reasons which cause employers to be reluctant to establish formal private pension
plans are the legal requirement to pay heavy service indemnities to employees
who leave (retirement is a form of leaving) and the existence of thrift plans
for Dirigenti (supervisory employees) generally calling for combined contribu-
tions of 15% of earnings.
5. The conditions herein described are as of September 1, 1953.
PART 2: EMPLOYEE DATA
CLASSES OF EMPLOYEES
6. The laws bearing on Social Insurance recognize three classes of
employees, all of whom come under the system:
(a) Operai (workers)
(b) Impiegati (staff)
(c) Dirigent (supervisors)
7. While supervisors are included in the Social Security program and
under Family Allowances, they are temporarily excluded from pensions for age
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and invalidity, and from protection for their widows and orphans. Pending
the passage of a law which will bring them under the national pension system,
contributions are being made by and for them under the plan described in
Part 4.
AVE FIAE EARNINGS
8. The latest publication entitled "Rassegna di Statistiche Del Lavoro"
gives labor statistics up to February, 1953, and covers about 2,500,000 em-
ployees of 78,000 organizations, constituting some 80% to 90% of Italy's industry.
From this it appears that the range in earnings of workers and staff, which
varies by districts and capability, now is about as follows:
(a) Male Workers: Per day from L. 1,062 up to 1,330 in Rome; from 1,133
to 1,401 in Milan; lower in other places; industrial average 1,077.
(b) Female Workers: Per day from L. 856 to 970 in Rome; from 927 to
1,023 in Milan; lower in other places; included in industrial average
given for males.
(c) Male Staff: Per month from L. 30,475 up to 63,763 in Rome; from
32,321 to 65,609 in Milan; lower in other places; industrial average
44,315.
(d) Female Staff: Per month from L. 26,136 up to 61,579 in Rome; from
27,930 to 63,373 in Milan; lower in other places; included in in-
dustrial average given for men.
9. All wages and salaries, such as the foregoing, are paid upon the
basis of 14 months per year, to cover the required Christmas and vacation
bonuses.
10. Supervisors are not covered by the above report. We were told that
L. 120,000 per month would be a minimum salary in the large cities, and that
the average there would be around L. 250,000. These salaries also are paid on
a 14 months per year basis.
VACA,,_TIWNS
11.
The customary vacation schedule is reported to be:
Working Days
Of Vacation Per Year
Workers
Staff And
Supervisors
Service up to 1 year
0
0
Service from 1 to 2 years
8
15
Service from 2 to 20 years
15
20
Service over 20 years
20
30
UNIONIZATION
12. Membership in unions is not obligatory in Italy and there is no
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Pensions In Italy ? 3
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closed shop. However, the great majority of workers, staff, and supervisors
belong to unions, either upon a national or local area basis.
13. If an employee sees fit not to join a union, he receives, according
to the law, the same benefit as the union members.
14. ` Unions formerly sponsored by employers for their employees are now
free of employer influence. Employers, however, have their own unions, and
it is estimated that 60 to 65 percent of the employers in the industrial field
belong to such unions, The Confederazione Generale dell'Industria Italiana,
which represents the association of all employers' unions for the different
industrial fields, negotiates with the worker& unions and the decisions are
.applied upon a national basis,
15. Italy established its first national pension system in 1919. The
law was amended in 1935, 1939, 1943, and radically as of April 4, 1952 under
Law 218. The system is compulsory for persons employed. in industry, commerce,
finance, agriculture, and domestic service, but for the present it excludes
Dirigenti. Furthermore, separate plans exist, not only for the armed forces,
civil servants, employees of the communes (political subdivisions), and em-
ployees of the nationalized railway system, but also for the employees of the
income tax and customs divisions, and the employees of private marine, railway,
and telephone operations. These plans differ among themselves, but all are
Government sponsored, and funds are handled by stipulated Government agencies.
The proposed separate Government pension plan for Dirigenti has not yet been
definitely approved, but it is anticipated that it will be before long.
16. Self-employed persons are excluded, but under a long established plan
(Assicurazione Facultativa), the Government offers to write individual annuities.
Prior to April 4, 1952, these were offered at favorable rates.
17. Foreigners who are resident in Italy, and have permission to work
for an Italian employer, are covered by the entire Social Security Program.
18. Pensions for invalidity, widows, orphans, and dependent parents are
part of the national pension system.
19. Pensions are granted as a matter of right,
20, Reciprocal agreements, covering only pensions, or also additional
Social Security benefits, and. protecting citizens living away from home, exist
with the United States, France, Great Britain, Luxemburg, Switzerland, and
Western Germany, and are likely to be extended.
SOME NATIONAL PENSION SYSTEM STATISTICS
21. The Instituto Nazionale Previdenza Sociale (called ION.P.S.) was
good enough to provide the following statistics:
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Pensions In Italy - 4 - December, 1953
_7 1
(a) Number of employed persons covered on 12-31-1948 8,058,000
(the latest available figure)
Included in the total were 1,965,000 agricultural
workers.
(b) Number of pensioners, on 12-31-1952:
(1) Pensioned for age, 1,319,000
(2) Pensioned for invalidity, 5109000
(3) Pensioned widows, orphans, and parents, 169.000
1,995,000
(c) Number of persons, on 12-31-1952, who were working
after age 60/55 and receiving reduced. pensions, 1760000
75% of these persons are males
(d) Total pensioners at end of 1952, 2,174,000*
(e) Average annual pension of all persons receiving
pensions, L. 839000
*In 1950, the total number of pensioners was 1,809,000.
NORMAL RETIREMENT AGES
22, The law stipulates that old-age pensions will be payable from age 60
to males and 55 to females. Deferred retirement is not only permissible, but
is encouraged (1) by reducing the pension payable from 60/55 by only 25% during
such continued employment, and (2) by increasing the pension from the later
date of retirement. See paragraph 37.
23. Disability pensions may be granted at any earlier age,
MINIMUM SERVICE REQUIREMENTS
24.. Age pensions are payable only if the employee has contributed to the
national system for at least 15 years, The law requires a minimum of 180 month-
ly or 780 weekly contributions. Since 1-1-1952, contributions are credited to-
ward this minimum period during periods in which unemployment allowances are
paid, hospitalization effected, or post-hospitalization subsidy received.
25. Disability pensions are payable only after a minimum contribution
period of 60 months or 260 weeks, upon the same basis as for age.
26. In order for a widow, orphans, or dependent parent to receive a pen-
sion, the employee who died before his pension became effective must have been
registered under the law at least 5 years, and made payments for at least 1 year
during the 5 years preceding his death.
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CONTRIBUTIONS FOR PENSIONS
December, 1953
27. Workers and Staff pay a tax of 3% of all forms of remuneration
towards the national pensions system. Contributions are payable during em-
ployment (minimum permissible age 14), including any beyond age 60/55.-
28. Employes pay two pension taxes for workers and staff, one accord-
ing to the following schedule, and in addition 6% of all paid remuneration:
Monthly Dnployer
Class
Monthly Esrnin s
Contribution
For Pensions
1
Up to L.
15,600
L.
26
2
L.
15,600 to
21,200
36
3
219200 to
27,300
44
4
27,300 to
33,800
56
5
33,800 to
41,200
66
6
41,200 to
49,400
78
7
49,400 to
5$,500
92
8
58,500 to
68,500
108
9
68,500 to
79,300
126
10
79,300 to
91,400
144
11
91,400 to
105,000
160
12
105,000 to
1209000
17$
13
Over
120,000
200
29. These tabulated employer contributions are recorded in the form of
stamps in booklets which are renewed each two years. The aggregate of these
contributions underlies the base pension.
30. These tabulated contributions are designed to provide the base
pension upon a capitalized basis. The employee contributions of 3%, the
employer?s contributions of 6%, plus Government contributions of 3% upon the
entire employer?s payroll, are used upon a disbursement basis to provide the
balance of the pension, viz. a total of 45 times the base pension.
PENSIONS FOR WORKERS AND STAFF
31. The annual amount of base pension depends upon the aggregate amount
of the stamps which have been pasted into the worker and staff booklets, and
is established as follows:
Males
Females
Value of Stamps
From Age 60
From Age 52
(a)
First L. 1,500
45%
33%
(b)
Next L. 1,500
33
26
(c)
Balance
20
20
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32.
The result is multiplied by 45, under the 1.952 law, and brought
to a round
figure. To this are added 10% for each dependent son under age
18 (higher
if unable to work) and the state financed quota of L. 100.
33.
Prior pensions have been put upon the new basis.
34.
To illustrate: Assume a male employee with L. 10,000 in stamps,
and with no dependent son. His annual pension from age 60 will be:
L. 1,500 x .45 or L. 675
1,500 x .33 or 495
7,000 x .20 or , 1~ 100
2,570 plus L. 100,,or L. 2,670,
rounded to L. 2,676
2,676 x 45 or L. 120,420, rounded to L. 120,600
payable at
a monthly rate of L. 10,050, subject to an additional month pay-
able in December.
35.
Forecast Table, The following table was prepared for the President
of one company interviewed:
Monthly Pensions Payable To Workers And Staff Under The 1952 Laur
Average
Monthly
Period Of Employment Credited Under 1 92 Law
Earnings
1 Yrs. 20 Yrs. 25 Yrs. 30 Yrs. 35 Yrs. 40 Yrs.
L. 25,000
L. 8,100 L. 10,500 L. 12,050 L. 14,150 L. 16,000 L. 18,000
30,000
9,700 12,250 14,750 17,300 19,800 22,300
35,000
11,050 14,050 17,000 20,000 22,950 25,900
45,000
12,700 16,200 19,700 23,200 26,400 30,250
55,000
14,600 18,700 22,850 27,000 31,150 35,300
70,000
19,1.50 24,850 30,500 36,200 41,850 47,500
100,000
23,750 30,950 38,150 45,350 52,550 59,750
36.
The ratio of pension to final earnings is certain to be much lower,
because the
above ratios are based on average earnings. Also, in the highest
earnings cl
asses, the limit of included earnings of L. 120,000 in any one month
may reduce
the pensions below those shown.
37.
Deferred Retirement. For men who work beyond age 60, and women
beyond age
55, two special provisions exist:
(a)
75% of the pension available at age 60/55 is paid while working
after these ages. The 25% reduction in the pension may, however,
not exceed. 25% of subsequent earnings.
(b)
The base pension is increased by 20% of the additional stamps
credited. during the deferred employment, but not beyond age 65.
This amount is also multiplied by 45.
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To illustrate: Assume that a man works until age 65 and accumulates L. 3,000
of additional stamps. He will receive a supplemental annual pension of L. 3,000
x .20 x 45, or L. 27,000, and also a 13th monthly payment equal to L. 2,250.
38. Minimum Annual Pension payable in no event is to be less than:
(a) From age 65 for age or for earlier disability L. 65,000
(b) Before age 65 for age 45,000
39. Maximum Pension is not to exceed 80% of the average earnings of the
insured person during the final 5 years of employment.
40. Working Wives are entitled to a pension based upon their own aggre-
gate stamps. If their husbands predecease them, the wives are entitled in
addition to 50% of the husband's prior or prospective pension.
INVALIDITY PENSIONS
41. Invalidity (disability) pensions are payable if an insured person
is presumably permanently disabled to the extent that, in an occupation suitable
to his qualifications, he cannot earn one-third of the usual earnings, if a
worker, and one-half if staff.
42. The method of figuring invalidity pensions is the same as for age
pensions, upon stamp credits to date of invalidity, subject to an annual minimum
of L. 60,000.
PENSIONS FOR DEPENDENTS
43. Pensions for dependent. survivors are based upon the pension an in-
sured person was receiving if he liad reached retirement age, or upon a disability
pension he was receiving from an earlier age. If he dies before retirement age,
stamp credits to date of death determine the pension of which dependents are
paid a percentage.
44. The L. 45,000 minimum pension provision affords protection to de-
pendent survivors, where the service of the deceased has been short or earnings
very low.
45, The minimum pension paid to a widow or to one or more full orphans
is 50%, and the maximum to a widow and 3 orphans, or to 4 full orphans, is 100%.
46. Widows receive 50% irrespective of their age or of the presence of
children. Pensions are terminated on remarriage.
47. Disabled husbands of working wives are treated the same as widows.
48. Orphans receive 20% each if half orphans; 30% if full orphans; up
to age 18; to a higher age if incapacitated.
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CPYRGHT
49. Parents and Grandparents, who are age 65 or over and who are de-
pendent, receive 15% each, not to exceed 30% in all in this category.
50. Christmas Bonuses of one month's pension are payable to dependent
survivors as well as to retired insured persons.
51. Dependent wives and children, not entitled to pensions upon the
death of an employee, receive 45 times the base contributions; not less than
L. 22,500, nor more than 67,500.
PART 4: SPECIAL EMPLOYMENT PROVISIONS
DIRIGENTI
52. Dirigenti (supervisory employees) may be so designated by their
respective employers, although, where Dirigenti belong to unions, the classi-
fication of positions may be a matter of negotiation.
53. Dirigenti are temporarily excluded from the national pension
system. For this reason, in part, special funds have existed for their bene-
fit as far back as 1927, in industry, commerce, finance, etc. The principal
fiscal agency which handles these Dirigenti funds is IPADAI (Instituto Di
Previdenzia a Assistenzia De Dirigenti Azicode Industria). Prior to 1939, it
was legal for employers to offer separate plans to their own Dirigenti, pro-
vided benefits were at least equal to the group plan.
54. A bill already passed by the Italian House, but which did not
reach the Senate in time, will be reexamined by the new Parliament, and. it
is expected will confer on IPADAI the administration of pensions for old age,
invalidity, and widows and orphans.
55. The present customary contribution rates by employees of 4%, and
by employers of 11%, of all remuneration are likely to continue as a minimum,
but the percentage is likely to be limited to annual earnings of L. 3,289,000.
The proposal is to pay pensions on a scale to be fixed by administrative
decree, based on the average earnings of the last 5 years, instead of paying
out accumulated capital and interest as at present.
56. It is expected that Dirigenti will have the option to join either
IPADAI or private funds. If an employee leaves a private fund, he will be
paid his share upon leaving. If he is in IPADAI, his credits will stand if
he leaves one employer to go to another. Upon retiring from work, for age
or disability or other reason, or death in service, all credits will be paid
to him or his beneficiaries.
57. For the tax status of such plans see Part 7.
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58. The payments made to long service Dirigenti, together with their
notice and service indemnities, are so large that those employees could pur-
chase substantial annuities for themselves if they saw fit to do so. This is
a major reason why so few private pension plans appear to have been establish-
ed to date.
PAYMENTS ON LEAVING EMPLOYMENT
59. Two interrelated laws bear upon payments made by the employer to
persons who leave his employ:
(a) P.reaviso (Notice of Discharge Indemnity), and
(b) Indemnita di Licenziamento (Service Indemnity)
60. NOTICE OF DISCHARGE requires the following payments, related to
final earnings:
(a) Workers generally for a period based, as a rule, on labor contracts.
(b) Staff, according to category
Years Of Service
Up To 5 To Over
Category 5Years 10 Years 10 Years
Payment To Employee
1st 2 months 3 months 4 months
2nd 1.5 " 2 " 2.5 "
3rd 1 " 1.5 2 "
(c)
Supervisors. Service up to 2 years; 5 months' salary. Additional
service = one-half month per year, not exceeding 7 additional
months, making 12 months' salary the maximum.
61. The periods in the preceding paragraphs are established by con-
tracts stipulated by the unions.
62. These lump sum payments are due if an employee is discharged with-
out notice. If advance notice is at least as long as specified in the above
tabulation, he receives pay to that date, and is obliged to remain at the dis-
posal of his employer, but with time out to look for another job.
63. SERVICE INDEMNITY requires the following payments, also related to
final earnings, as generally provided by union agreements:
(a) Workers, generally a certain amount based, as a rule, on labor
contracts.
(b) Staff, one month's salary per year of service, without limit, for
any service after 1945. For service prior to 1937, one-half month
per year; during 1937 to 1944, five-sixth month per year.
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(c) Supervisors, one month's salary per year of service for the
first 10 years of service; 1.5 months for the additional
years of service, without limit.
64. The final earnings upon which these two indemnities are based
are the regular earnings only.
65. The service indemnity is payable whether or not the employee
works during his notice of discharge period.
66. Payments must be made in cash if the employee so elects, and
no offsets are allowed because of other employer sponsored benefits to which
the employee may be entitled.
67. Any act which would bar the employee from continuing with his em-
ployer, as theft, fraud, etc. relieves the employer of paying both forms of
indemnity.
68. If a staff member is promoted to be a supervisor, he may receive.
the service indemnity payable at the time of promotion, or his prior staff
service may be added to his supervisor service and eventually paid him. The
latter method, because it is more favorable to the employee and defers the
employer's payment, is usually followed.
i M, LOYMENT INSURANCE
69. The daily rate payable to an insured person out of work because
of discharge (involuntary separation), and properly registered in the public
employment offices, is L. 227 for workers and 232 for staff, beginning with
the 8th day following termination of work, plus L.80 per dependent child up
to age 18 for workers and 16 for staff; to a higher age for sons permanently
disabled. Parents over ages 60/55, if dependent and without funds or other
assistance, receive L. 80 each.
70. Indemnity payments are limited to a maximum of 180 days in any
one year.
71. The low rate, and the need of daily signing an unemployment
register, are designed to encourage persons to take employment. However, un-
employed persons have vocational training available to them, and. are not re-
quired to sign the register while so engaged.
72. While there is a special tax on employers (see paragraph 80) to
promote public works, in part to relieve unemployment, there is no compulsion
on the employee to accept this or any other form of work that may be avail-
able to him.
FAMILY ALLOWANCES
73. Special provisions as to Family Allowances exist for Government
employees and certain other'catOgories;:,but other industrially employed per-
sons, are entitled to the following Family Allowances:
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provided monthly income is less than L. 10,000 in the case of one parent and
15,000 in the case of two, or, if unable to work, provided pension incomes do
not exceed L. 10,000 and 15,000 respectively.
74. Prior slight differences in benefits between workers and staff were
removed in June 1952. Dirigenti also are included in this form of Social
Insurance.
75. Toward these benefits, employers contribute 22.5% of all remunera-
tion up to L. 23,400 per month per male employee and 19,500 per female employee.
OTHER BENEFITS
76. The comprehensive Italian Social Insurance program involves other
benefits such as insurance against tuberculosis, sickness and work accidents,
medical and, hospital benefits, and maternity benefits. .
PART 5: TOTAL EMPLOYER CONTRIBUTIONS
77. The national pension system contributions are only a small part
of the total contributions (taxes) the employer is required to-make to the
Social Insurance Program.
78. The Statistical Report referred to in paragraph 8 shows that the
average rates of contribution in industry for the month of February 1953 were
as follows:
(a) For a wife, earning less than L. 10,000
per month
(b) Per dependent child up to age 18, and up to
21 if a student
(c) Dependent parents over age 60/55 each
(a) Workers 28.3% on all remuneration, plus
19.1% on remuneration limited. to L. 900 per day.
(b) Staff 21.7% on all remuneration, plus
11.4% on remuneration limited to L. 23,400 per month.
79. These costs do not include holiday and vacation pay or Christmas
or vacation bonuses.
80. One Italian company provided the following breakdown of its social
insurance contributions:
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Pensions In Italy
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Purpose
Rate
Pension stamp schedule
0.2%
(paragraph 28)
(approx.)
Pension /.4 times fund
6.0%
Work Accidents
2.58%*
Sickness - Workers
6.53%
Sickness - Staff
4.0%
Family Allowance
(supervisors included)
22.5%
Housing Program
1.15%
Public Works Program
4.0%
December, 1953
Based On Monthly
Remuneration Of
Maximum L. 120,000 for
workers and staff
Entire remuneration of
workers and staff
Entire remuneration of
workers
Entire remuneration of
workers
Entire remuneration of
staff
Remuneration up to L. 23,40
for male and 19,500 for
female employees
Entire remuneration of
all employees
all employees
Entire remuneration of
81. Adding holiday and vacation pay and bonuses, together with notice
and service indemnities, the total costs become very large as a percent of
regular employee earnings. This is Company A in the second paragraph following.
82. Since supervisors are excluded from all benefits except Family
Allowances, many employers apparently make special provisions for them in
addition.
83. The total expenditures for the year 1952, in percent of payrolls,
for two large Italian companies were as follows:
Percent Of Regular Earnings
Benefits For
Company A
Company B
Workers
61%
50%
Staff
71
90
Supervisors
11
2
Over-all average
-
67
80
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Pensions In Italy
December, 1953
PART 6-. PRIVATE PENSION PLANS
84. Contacts with Government, industrial, and life insurance company
executives developed the fact that there seems to be no point at which one
can learn the extent to which private pension plans supplement the national
pension system. The following summarizes what we learned-.
(a) Large banks all have private pension or thrift plans; probably
many smaller banks as well,
(b) Only a small number of large industrial organizations, chiefly
subsidiaries of American corporations, have either private pension
or thrift plans of the formal announced type.
(c) Many industrial employers are believed to have granted pensions
in the past, and some are supplementing the present more liberal
national pensions, insofar as possible upon an informal basis.
Employers have naturally tried to avoid incorporating such practices
into union agreements.
(d) Since the 1952 social insurance taxes can be increased by
Presidential Decree, and benefits may again be increased, employers
seem reluctant to commit themselves to supplementing the present
benefit scale,
(e) Supervisors generally have a 15% thrift plan at present, and are
likely in lieu thereof to be brought under a special section of
the national pension plan,
(f) The notice, and especially the service, indemnity payments provide
most retiring employees with such large sums that these, plus the
national pension, can be held to give the employees reasonable old-
age protection,
85. The 1952 law has caused employers to reexamine the whole pension
situation, and in due course it is expected that the picture will clarify and
that many successful employers will establish supplementary pension plans.
While the 1952 law increases prior pensions substantially, many feel that,
with comparatively low earnings rates in Italy, which make savings almost im-
possible, it is essential that liberal retirement incomes be provided through
a combination of public and private plans.
FUNDING OF PRIVATE PLANS
86. None of the three largest Italian life insurance companies, which
were interviewed, had at the time on its books a single insured private pen-
sion plan. The few employers who had private plans handled the financing
themselves or had set up special agencies to handle the funds. However, the
life insurance companies are interested in writing such plans, and the largest,
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Pensions In Italy
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December, 1953
Instituto Nazionale Delle Assicurazione (Government owned, and called "ION.A."),
had recently submitted to a number of employers proposals for a plan which it
had devised to supplement national pensions and Dirigenti benefits.
87. A preliminary study of this proposal led us to the conclusion that
the plan was unnecessarily liberal both as to pensions and death benefits,
that the relation of pensions to final earnings left costs too uncertain, and
that the cost estimates in the plan we reviewed were low.
88. It takes a long and broad experience to enable sound and reasonable
private pension plans to be established, which experience obviously has not yet
been had in Italy. A study of the practices of other countries would be helpful,
and especially of those in the U `! edx Btakes where the attitude toward private
pension plans is, on the whole, much more conservative,
89. In Italy, thousands of employers are reported to be using life in-
surance company facilities to accumulate reserves to guarantee the payment of
service indemnities. The reserves already are, or eventually will be, large
enough to pay all obligations of the employer were he to cease business. Be-
cause the law requires that the beneficiaries of employees who die in service
.receive a minimum sum equal to credits corresponding to 10 years of service, a
small life insurance element is added to the accumulations of reserves. Some
employers pay in additional sums, and these, plus interest, and less adminis-
trative expense, are paid out to employees or their beneficiaries.
90. There should be some economies if life insurance companies write
pension plans for employers whose service indemnity reserves are already in
their hands.
91. Incidentally, the life insurance companies who administer these
service indemnity reserves offer employees who leave, or the beneficiaries of
employees who die in service, an opportunity to buy annuities with these re-
serves. We are advised, as was to be expected, that very few take advantage
of this conservative procedure. Hence, under an over-all pension plan which
bases its benefits on the assumption that service indemnity reserves will be
used for pensions, the end results will be less favorable than anticipated.
The employee may not be deprived of his rights to a cash payment as to such
reserves,
ILLUSTRATION OF A PRIVATE PENSION PLAN
92. The essential provisions of the private pension plan of one large
bank are as follows:
(a) The normal retirement age is 60 for men and 55 for women, to tie
in with the national pension system.
(b) Any service of less than 10 years at age 60/55 bars an employee
from a pension.
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Pensions In Italy - 15 -
(C)
December, 1953
The benefit rate for those with longer service is 2% per year
(including the first 10 years), with a maximum of 70%, based on
final earnings.
(d) Employees may retire at an earlier age without discount when they
have completed 35 years of service. Early retirement is permiss-
ible at age 55/50 after 10 years of service; with employer consent.
Retirement is compulsory upon completion of 40 years of service or
attaining age 65; in rare cases retirement may be postponed to
age 70 or 45 years of service.
(e) Disability pensions are available after 10 years of service, irres-
pective of age.
(f)
Widows receive 60% of the husband's actual or prospective pension,
providing they were married at least 2 years. Pension ceases on
remarriage.
(g) Half orphans receive 10% each. The first two full orphans receive
25% each; additional full orphans 10% each. Payments are made to
age 21, if not working or not married.
(h), One or more dependent parents over the age of 60 receive an aggre-
gate pension of 20%.
(i)
(j )
From the pensions otherwise due, is deducted any pension paid under
a plan or plans established by legislation.
Employees pay 5% of earnings; the employer 15%. From both of these
contributions, the pension taxes are deducted; now as to workers
and staff 3%, and about 6.2% to the employer. Employee contribu-
tions start with employment and are limited to 35 years.
(k) This particular bank made an initial contribution to the plan of
more than $1,000,000 at the current rate of exchange.
PART 7: TAX STATUS OF CORPORATIONS AND INDIVIDUALS
CORPORATION INCOME TAXES
93. The income tax on gross corporation profits varies between limits
of 25% and 30%.
INDIVIDUAL. INCOME TAXES
94. There are two national individual income taxes: No. 1 (flat) and
No. 2' (graded).
95. Tax No. 1. The payments required, which where possible are deducted
by the employer for transmittal to the Government, are as follows:
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December, 1953
(a)
On the first L. 240,000 of annual income
None
(b)
On income between L. 240,000 and L. 960,000
4.2%
(c)
On income over L. 960,000
8.4
96. Tax No. 2. Payments are based on all income, including the first
L. 240,000, if the income exceeds that amount. The grading is in very small
steps. The following table, showing a very few income classes, will illustrate
the taxes payable
Rate
Amount
tip to L. 240,000 of annual income
On income between L. 240,000 and L.
245,000
None
2% L.
4,800
n n " 1,010,000 if
1,030,000
3.19%
32,538.
It 3,225,000 n
3,275,000
5.01
162,825
It " 10,100,000 "
10,300,000
8.18
834,360
On income of L. 500,000,000
50.0
250,000,000
97. 50% is the maximum No. 2 rate. Since it is applied after the No. 1
tax, the combined maximum tax rate is just under 58.4%.
PAYMENTS INTO PLANS
98. Broadly speaking, any payments (taxes and contributions) made by
employers or employees to Government plans or to those sponsored by the
Government are deductible insofar as income tax is concerned. This is true
of the national pension system, of various Government pension plans, and of
plans for special private employing groups whose employees do not come under
the national pension system, but for whose plans I.N.P.S. handles the funds.
99. The substantial contributions referred to in paragraphs 78 to 83
apparently all constitute deductible expense.
100. No income tax deductions are allowed to employers or employees on
contributions to private pension plans.
PAYMENTS FROM PLANS
101. All forms of income,except under compulsory insurance plans, are
subject to income tax if the total taxable income is in excess of tax-free
amounts.
102. Where large payments are?received'in any one year, as from service
indemnity payments, a severe No. 2 tax penalty is avoided by the application
of a rule that the net sum, after Tax. No. 1 has been deducted, is divided by
as many years as the employee has been in the plan. If the total does not
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Pensions In Italy - 17 -
December, 1953
xceed L. 600,000, no further tax is due; if it does, Tax No. 2 is due and
s calculated in the following manner: the service indemnity payment is
ivid.ed by as many years as the employee has been in the plan; the resulting
mount establishes the rate of taxation, as per paragraph 96. This rate is
pplied to the total amount due for the service indemnity.
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