If you work in Italy, a portion of your salary is earmarked each month for your future retirement. But exactly how many years of contributions are needed to guarantee the benefit? Whether retirement is a near reality or a distant future, it is natural to wonder how the pension system works in the country.
In Italy, there are three main types of retirement: the state pension (old age guesthouse), managed by the National Social Security Institute (INPS), occupational pensions (pensioni di category o chiuse) and private pension funds (integrative pension funds). Of these, the most common is the state pension.
According to the World Economic Forum, the Italian state pension is among the most generous in the world, but understanding it can be a challenge.
How does the system work?
Italy's state pension system follows the “notional defined contribution” model, which means that the amount of your pension depends on how much you and your employer have contributed over your working years.
Generally speaking, your employer contributes €2 for every €1 you pay.
Calculating the amount of your state pension is complex. In short, the amount will be calculated based on the total contributions made by you and your employer throughout your working life, adjusted for variables such as the growth of the country's Gross Domestic Product (GDP) since the contributions began, fluctuations in the cost of living and a “transformation coefficient”, which varies depending on the age at which you apply for retirement.
What is the minimum retirement age in Italy?
All Italian residents have the right to apply for state pensions at 67 years, as long as they have contributed at least 20 years.
Those who have contributed for less than 20 years may still be entitled to retirement (known as old age pension), however with a reduced value and under strict criteria.
It is possible to retire early and access the state pension (known as early retirement), as long as the worker has contributed for at least 42 years and 10 months, in the case of men, or 41 years and 10 months, for women.
Another possibility is to retire at 64 years of age, if you have contributed for at least 20 years and the monthly retirement amount is at least three times higher than the social allowance (the minimum subsistence amount). For the year 2024, this amount is €1.603,20.
It is worth noting that the retirement age in Italy is not fixed: it is linked to average life expectancy and is reassessed every two or three years. The next adjustment is scheduled for 2026.
What about contributions made in other countries?
If you have contributed to the public pension system of another country, there is good news: this contribution period can count towards your retirement in Italy.
Italy has signed a series of bilateral agreements which allow these contributions to be taken into account in the calculation of the Italian pension. Contributions made within the European Union are guaranteed, and the country has agreements with Brazil, Canada, the United States and Australia.
With Brexit, the United Kingdom lost the bilateral agreement with the INPS. However, there are options such as Qualified Recognized Overseas Pension Scheme (QROPS), which allows the transfer of UK pension funds abroad, under different rules.
FOLLOW-US
