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Retirement in Italy:
No More
All Italians receive an old age pension, but the retirement age will increase to 66 by 2018.
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ITALIAN AMERICA
By Martin Gani
Ever since Italy’s new government, led by Prime Minister Mario Monti, introduced sweeping pension reforms
late last year, retirement has become the nation’s hottest
topic of conversation. Currently, Italy has an estimated
13.8 million people who receive government pensions.
In addition, Italians who change jobs or retire, also
receive a Trattamento di Fine Rapporto, a lump sum payment consisting of one year’s salary plus interest. Some
retirees supplement their pensions with private insurance,
but that is not obligatory.
bearing in mind that in 2010, the latest figures available,
the state paid out nearly $341 billion to pensioners; a
huge sum representing some 16.6% of GDP, according to
ISTAT, the Italian census bureau. ISTAT also reported
that about 45% of pensioners, some 7.6 million people,
received less than $1,320.00 a month in 2010.
Pension Shock
Although retiring at the age of 65 or 66 is the norm
among other EU nations and the U.S., it came as a bit of
a shock to Italians used to generous government pensions
at an earlier age. Between 1973 and 1992, women working
No More Dolce Vita?
Until December 31, 2011, all employees,
including the self-employed, could retire with
a full government pension, regardless of age,
if they’d contributed to the government pension plan for at least 40 years. But now, thanks
to new legislation already approved by both
the Senate and the Chamber of Deputies, the
retirement age has been raised to 66, beginning this year.
In addition, all Italians used to be eligible
for an old age pension, regardless of whether
or not they made any contributions. For
women it was age 60 and age 65 for men. The
Monti government changed the rules here
too. The right to receive this minimum pension, currently around $715.00 a month, is
maintained, but the age will gradually increase
to 66 for both men and women by 2018.
Why this dramatic change? Italy, like many
other European nations, is going through a
biting financial crisis. After Greece, it has the
second largest debt in the 27-member European Union (EU), standing at around $2.53
trillion as of March 2012, corresponding to
123% of GDP (gross domestic product), according to the Bank of Italy. There has been
little growth in recent years and in 2012 the
economy will actually be in recession although
the outlook for 2013 through 2015 is more
optimistic. Along with raising taxes, the Value Added
Tax (VAT) and fighting widespread tax evasion, the government had to cut pensions,
SUMMERAMERICA
2012 7 ITALIAN
Italy pays pensions to about 428,800 retirees
under the age of 50 at a cost of $9.62 billion a year.
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for the state had the best pension options: after 14 and a
half years plus 1 day of work, they could retire to family
life. Men under the same conditions worked five more
years and all those employed by the municipalities could
retire after 25 years of work.
This produced a mass of pensioners in their 30s and
40s. Today, the Italian government pays a pension to
around 428,800 retirees under the age of 50, which is
costing Italian tax payers $9.62 billion a year, as reported
by the census bureau ISTAT and the Istituto Nazionale di
Previdenza Sociale (INPS), equivalent to America’s Social
Security Administration. Workers in the private sector and
the self-employed had to work for at least 40 years before
they could retire, which still meant millions of people quitting work and earning a pension long before the age of 65.
That’s not all. On top of pensions, the Italian government also helps low-income, 100% disabled persons
between the ages of 18 and 65 with a monthly check of
$341.00. It is also worth noting that in Italy, nearly all
workers and pensioners also get a tredicesima, a thirteenth
salary or pension payment, in December.
The Social Security Umbrella
How did it all start? As industrialization began in the
early 19th century and people started moving to the cities,
the large extended families in the countryside, who cared
for each other, gradually gave way to nuclear families. If
the bread earner, almost always a man, fell sick, was injured,
fired or died, his wife and children were left destitute.
Against this serious social issue, in the mid-19th century,
workers formed associations for mutual help known as,
Le Società di Mutuo Soccorso. In 1862, just a year after a
united Italy was born, some 440 such associations existed
in central and northern Italy. Workers joined them voluntarily and paid a regular contribution.
In 1882, the government stepped in and set up an insurance fund against accidents at the work place. Participation
was voluntary. In 1898, this workers’ insurance was made
obligatory and more importantly still, a national security
system, called the Cassa di Previdenza was set up to care
for the disabled and elderly, but workers could choose
whether they wanted to pay a percentage of their salaries
in exchange for this service or not.
The Italian government as well as employers made a
small contribution to the pensions, marking the beginning
of the current system. In 1904, it became obligatory for
state and railroad workers to join the Cassa di Previdenza.
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88 In the ensuing years, the service was extended to some
workers from the private sector, too.
By 1918, there were 700,000 members and 20,000
pensioners protected by the new social security umbrella.
The following year, insurance against old age became
compulsory for all 12 million Italian workers, guaranteeing
everyone an old age pension. The massive re-organization
this required was handled by a newly created, much larger
body, Cassa Nazionale Delle Assicurazioni, which evolved
into the aforementioned INPS in 1943.
How does INPS work? It is a state-run welfare institute. Workers pay a portion of their monthly salary into
a general, national pension plan run by the government
that pays the pensions of all the retirees. To qualify for a
partial pension, workers have to contribute for at least 20
years. For a full pension they have to work for 41 years,
as of January 2012.
Saved By Immigrants?
It is hard to tell how long this state-run system will
work. According to ISTAT and the United Nations, Italy
will continue to age. It already has the oldest population
in the European Union and some predict that, come
2030, about a third of the population will be made up of
pensioners over 65.
This, however, isn’t necessarily going to happen. Italy
is accepting migrant workers in increasing numbers out
of obvious economic necessity. In 2010, the immigrant
population topped 4.5 million. These “new” Italians have
more children than Italians themselves. They also are making a healthy contribution towards paying the pensions of
Italy’s retired population.
Meanwhile, Prime Minister Mario Monti’s government of technocrats, not politicians, is optimistic. “With
the reforms already enacted and the continuing austerity
measures, Italy will make it in a bigger and better way than
others in the EU,” said Monti last April.
Corrado Passera, the minister responsible for economic
development, supports this prediction. “In the short and
medium-term, we’ll be spending $130 billion to stimulate
the economy. We may well see growth figures turning
positive even in 2012.” One can only hope their optimism
is justified.
Martin Gani is a free-lance writer in Como, Italy. Contact him at [email protected]
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