The Social Security in Italy

Project Communicate October 2006

LawSocial Security “1st pillar”

Basic pension is covered by D.L. 503/1992 and L. 335/1995

Financial structure

Pay as you go

Social security contribution

Total percentage: 32,70%Of which:For employers 23,81%For employees 8,89%

Of which:For social security benefitsFor assistance benefits

The Income Tax on the annual salary

From 0 to 26.000 23%

From 26.001 to 33.500 33%

From 33.501 to 100.000 39%

Over 100.001 43%

The impact Income Tax on the annual salary:

EXAMPLE: ANNUAL SALARY 40.000 (23% TILL 26.000 = 5.980 + FROM 26.001 TO 33.500 (33%)=2.475 + FROM 33.501 TO 40.000 (39%)=2.535 Total=10.990 (average 27,47%)

Typology of Benefits

Life annuities

Form of pension provided for

1. OLD AGEF 60 – M 65

2. SENIORITYAGE F and M 57 years old (from 01/01/08 60 years old) and 35 contribution years (years of job);Or, 39 contribution years (from 01/01/08 40 contribution years)

Form of pension provided for

3. SURVIVORS’BENEFITS

4. DISABILITY

The substitution rate

The ratio between pension and the last salary is 80%

Pension adjustment

Indexation to inflation or cost of living

State Pension expenditure

13,5% of GDP in 2001 it will rise to 15,7% in 2040 if no further reforms

are taken

SUPPLEMENTARY FUNDS (2nd Pillar)

THE 98,3% OF THE ITALIAN BANKS (2004) HAVE SUPPLEMENTARY

FUNDS ARRANGEMENTS

SUPPLEMENTARY FUNDS ARE:

OPTIONAL

COMPANY FUNDS

TIPOLOGY OF FUNDS

PENSION FUNDS

SOURCES OF SUPPLEMENTARY FUNDS

COLLECTIVE AGREEMENTS (NATIONAL LEVEL & COMPANY LEVEL)

COMPANY REGULATIONS

FINANCIAL SYSTEM

DEFINED CONTRIBUTION

FUNDED

FINANCIAL SYSTEM

CONTRIBUTION:

TOTAL PERCENTAGE 4% FOR THE EMPLOYERS 2% FOR THE EMPLOYEES 2%

FORM OF PENSION PROVIDED FOR

OLD AGE:1. AGE

2. CONTRIBUTION

3. DISABILITY

4. SURVIVOR’S BENEFITS

5. ILLNESS

6. LABOUR ACCIDENTS

BENEFITS

MIXED WHEN YOU RETIREDEXEMPTION OF CONTRIBUTIONS AND TAXATION OF INCOMES AND BENEFITS (2% Employer 2% Employee)In case of TERMINATION of the EMPLOYMENT RELATIONSHIP the WORKER can REDEEM HIS PENSION ENTITLEMENT or transfer HIS position TO ANOTHER FUND

MAIN PROVIDERS

Fund asset management is entrusted to qualified financial intermediares:

savings, management companies, banks, stock brockerage

companies and insurance companies

Federazione

Autonoma

Bancari

Italiani

International & Projects Department

“Communicate Project”

October 2006