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© International Group Program

Country Panel Presentation: Italy

2016 IGP Regional EMEA Seminar Windsor, May 24-26, 2016

Stefano Pochini - Life Department Sergio Tonero - Broker Sales Department

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This presentation was exclusively prepared for the attendees of the 2016 IGP Regional EMEA Seminar. None of the contents of this presentation may be copied or disclosed to any other party or used for any other purpose than the one mentioned above without IGP's prior written permission.


Key Topics

Background Information Pension Health Care

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Benefit Scenario

Country and Company Info &

Background


Background Information

• Key Numbers: 14,000 employees 3,000 agencies 6,000 sub-agencies 300 banking branches 17,8 bill Euro of premium (direct and via agency) serve more than 16 million corporate/retail clients

• (SOURCE: BALANCE 2015)

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Company Info


Background Information

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Country Info

Population 2015 60,4 million

Labour force December 2015 25.5 million

Unemployment rate Avril 2015 12.4%

GDP 2015 (EUR) 1,537 Billion

Tax on pers. Income 11,6% of GPD

Inflation 2014 0,1%

GPD per capita 36,196 US$

Source: ISTAT/OCSE 2015


Key Topics


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Benefit Scenario

Summary of Social Security

Benefits


Social Security in Italy

• Italy has always been known for the comprehensive nature of its social security system, in terms of benefits offered, and coverage of all population.

• Main benefits provided: retirement, survivors' and disability pension, sickness and medical care, worker's compensation.

• Employers contributions to social security reach about 30% of EE’s gross salary

• Employers need to provide an additional mandatory termination indemnity (TFR fund)

Generous benefits mainly financed by employers’ contributions.

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Public Pension System

• Pension expenditures as percentage of GDP is expected to grow when baby boomers will retire.

Source Dpef

%

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Diffusion of pension plan in Italy

• In 2014 the number of pension plans are 6.1 mln with an increase of 5,4%

• Registered contributors to the pension system in 2014 are 19.5% of the total labour force (25.6 mil)

• 73% of the registered pension plan that pay a contribution came from the private sector

(*) Source COVIP (2014)

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Registered in a private pension plan

(*) Source COVIP (2014)

Type of pension plan

Number registered

FP Negoziali 1.994.276

FP Aperti 1.055.716

PIP 2.445.984

FP Pre-existing 650.133

Total 6.132.636

- PIP (Integrative Pension Plan) is preferred compared to others (plus 14.6% in 2014)

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Economics plan of an Italian Family

• Looking at real investment choices, the first priorities are in: Real estate investment Financial investment

(government bond, private bond, etc)

• Protection does not appear a priority, Insurance (eg. death, accident, sickness) has a strong appeal in a private employee benefits plan

Protection

Pension saving

Other investment (financial saving or real estate)

(*) Source: “Gap protection in Italy” - Research conducted by ANIA

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Diffusion of medical and accident insurance

• 4.3 % of the total of resident families in Italy (around 1 mil vs 24 mil), declared that they have an insurance. In the last survey, in 2010, there were 1,2 million (5.5%).

• The most important reduction concerns families where the HOUSEHOLDER is an employee; decreasing from 6.5% in 2010 to 4.4% in 2012.

in the Italian Family

(*) Source ANIA (2014)

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Key Topics


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Benefit Scenario

Summary of Pension System


An overview of the Pension System

Public pension system

Compulsory and unfunded pay-as-you-go system

Managed by INPS

Supplementary pension in addition

to the public - Industry wide pension funds - Open ended pension funds - Pre-existing pension funds - Personal insurance policies (PIP) - Open ended pension funds (individual membership)

Voluntary pension

Traditional insurance plan

1° Pillar 2° Pillar 3° Pillar

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1st Pillar

• In the 90’s the system has been redesigned in order to restore its financial sustainability, taking into consideration demographic trends.

• Before 1995 pension benefits were calculated through an earnings-related formula.

• In 1995 a reform introduced a gradual shift to a defined contribution formula: workers with at least 18 years of contribution at the end of 1995 will

maintain the earnings-related method a pro-rata, mixed regime will be applied to workers with less than 18

years of contribution at the end of 1995 the contribution-based method applies entirely to employees hired after

January 1996

• Seniority pension provision had been tighten up

Background on public pension system

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1st Pillar

• In 2004 there was another important reform : they introduced incentives for postponing the retirement pension raising the retirement age: 60 years for men and 57 for women with 35

years of payments, or with 40 years of contributions establishment of the central record of active positions INPS they defined the rules for the development of supplementary pensions


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1st Pillar

• In 2011 there was the last important reform : It abolished the old-age pension - replaced by EARLY - you can retire

before “old-age” requirements on the condition that one has contributed for 41 years and 1 month (women) or 42 years and 1 month (men); with the contribution requirements increasing annually until 2050.

It abolished the quota mechanism Flexible retirement : the age for the old age pension is a minimum

requirement, each employee can choose to work until 70 years old or when to retire, applying a quota ratio of the capital accumulated with the contribution method.


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1st Pillar

• In 2011 in that same reform : RAISING THE RETIREMENT AGE

‐ For all workers' pensions will be calculated with the contribution-based system, even for those who would have to make use only of the pay system

• Starting from 01/01/2012 OFFICIALS - men and women - the limit is raised to 66 years PRIVATE SECTOR 66 years for men and 62 for women, that will gradually

rise to 66 years in 2018 SELF-EMPLOYED 66 years for men and 63 and six months for women, that

will gradually rise to 66 years in 2018

• FROM 2021, the requirement is 67 years old for everyone.


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1st Pillar

• For workers and self-employed men, the retirement age ( subject to adjustment to the increase in life expectancy ) is fixed, as of 1 January 2012, at 66 years

• For employees of the public sector retirement age ( subject to adjustment to the increase in life expectancy ) is fixed, as of 1 January 2012, at 66 years

• The retirement age for female employees of the private sector and self-employed workers will gradually increase, as of 1 January 2012. In 2018 it will be the same as male workers.


The current situation: when you retire

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1st Pillar Background on public pension system

Worker with pay method

It is the system linked to the salaries of the last years of employment (10 years for employees and 15 for the self-employed). It was valid until 31 December 1995 for those who had at least 18 years of contributions.

THEY WILL RECEIVE AT THE TIME OF RETIREMENT ABOUT 70% OF

THEIR LAST REMUNERATION

Worker contribution method

It is the system linked to all the contributions paid

The current situation: estimation of the pension amount

THEY WILL RECEIVE AT THE TIME OF RETIREMENT ABOUT 50% OF

THEIR LAST REMUNERATION

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2nd Pillar

• Fondi pensione negoziali (industry-wide pension funds): occupational plans; independent legal entities (trustee based); membership is only open to employees fulfilling conditions set in the collective

agreements.

• Fondi pensione aperti (open pension funds): established by banks, insurance companies, investment firms and asset management

companies; offer both occupational and personal plans; no independent legal status; assets are required to be separated with respect to

those of the financial company promoting them.

• Fondi pensione preesistenti (pre-existing pension funds): introduced prior to the 1993 legislation; structured as defined contribution and/or defined benefit schemes. All existing DB

plans were closed to new members while many of them have been converted into DC schemes.

Type of Pension Plan

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2nd Pillar

• PIPs (personal insurance products) based on life insurance contracts: offered by insurance companies; only individual membership; plans’ assets are required to be separated with respect to those of the

insurance company managing PIPs.

Type of Pension Plan

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2nd Pillar Type of Pension Plan

You can join a supplementary pension individually or collectively

Employees

Self-employed and freelancers

Working members of cooperatives and any other category

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2nd Pillar

• In 2005 there was an important reform, introduced effective as of 01/01/2007: an additional way of financing, through the use of the future provisions

of the TFR (*) compensatory measures for businesses new tax regime assimilation of the supplementary pension schemes

(*) TFR - Trattamento di Fine Rapporto - is a statutory termination indemnity provided to all employees, the annual amount is equal to the annual salary divided 13.5

Supplementary pension in addition to the public

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2nd Pillar Contribution: choice for TFR

The supplementary pension schemes are funded through:

contributions payable

by the worker

contributions payable by employer

(if provided by a possible

agreement between the parties)

conferral of TFR’s provision

also in tacit form (new)

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2nd Pillar Supplementary pension system in addition to the public

The rules for workers employees

TFR’S PROVISION the employee has

six months to decide what to do:

1) Waiver of security and leaves the TFR in the company

2) Choose the form of security to target TFR

3) Tacit implies TFR passes to the FPC, or the FPA, or INPS.

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2nd Pillar

• When the employees leave the company, they receive a benefit amount equal to the annual accruals revaluated each year, established by the law at rate of 75% of the cost of living increase plus 1,5% fixed

• Company with at least 50 employees pay the TFR annual accruals to social security (INPS), that takes the commitments to pay the benefit to employees

• In this case the benefit is taxed at the average rate applied to the employee’s income during the five years preceding termination

1) TFR recorded by the company

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2nd Pillar

• The amount of TFR paid will be considered as contribution in the form of pension chosen by the worker: industry-wide pension funds; open pension fund; personal insurance plan.

• When the employees leave the company, they receive a benefit that is equivalent to all contribution paid, revalued by the management of its assets.

• In respect with the law the employees can ask an anticipation in special case (illness, etc)

2) TFR paid as a contribution to a pension plan

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2nd Pillar

• The TFR’s provision shall be paid by the employer to the supplementary pension scheme: to the industry-wide pension funds or to open pension fund; or as last case scenario, to INPS fund,

3) The employee is silent (tacit approval)

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2nd Pillar

• When it is due… 1) If there is a national collective

bargaining agreement which provides for a contribution paid by the company (so provide by almost all the national collective bargaining agreements)

2) If the employee pays in to the industry-wide pension funds its voluntary contribution and/or their TFR

• Upon the occurrence of both of these conditions snaps the obligation for the company

Contributions payable by employer

The rules

for the

employer

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2nd Pillar

• All workers can freely determine the amount of the contributions at their own expense.

• In the case of individual membership there is no minimum or maximum sizes.

• In the case of collective membership the minimum amount of contributions (Company / Employee) can be fixed by contract or company agreement.

• In any case it may be a fixed amount or a percentage of income.

Contributions payable by worker

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2nd Pillar Fiscal advantages

Final withholding tax of 15% - reduced from 0.30 per year in excess of 15% with the maximum reduction of 6% (minimum rate 9% after 35 years of presence)

The yearly contribution of the worker and the possible contribution of the employer are tax deductible from income up to a total of € 5,164.57

The rules

for workers

employees

15% or 23% of tax rate according to the reason behind the request of anticipation or refund (for example health expenses, unemployment, etc … )

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2nd Pillar Fiscal advantages

If the contribution is paid by the employer to the fund in favor of the employee and the solidarity contribution paid to INPS, it is deductible from the income

The company only pays solidarity surcharge of 10% on their contributions to the employee

The rules

for the

employer

Deduction of an amount equal to 4% or 6% (for companies with less than 50 employees) of the amount set aside in the TFR for forms of supplementary pensions

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Key Topics


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Benefit Scenario

Summary of Health Care

System


Overview of Healthcare System

Social Security System

Reason to reform

• Large number of users

• High level of coverages

• The financial impact

The change taken on 1980s • New way of management

• Defined level of service

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Healthcare System Reorganisation

Current structure functions

Decentralisation process 1998

Regional Authorities 1992

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Healthcare System Regional Authorities

• Quality in terms of local health units and hospitals

• Legislation, management and planning

• Ensure health care to immigrants (1999)

• Essential levels of health care (2001)

Increasing autonomy

Treatment and rehabilitation

Responsibility and planning in preventive activities

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Healthcare System Decentralization process

Central: ministry of health

Local: more than 200 local health units

Regional: legislation, management and planning

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Healthcare System Public and private spending in E.U.

Public spending % of GDP Private spending % of GDP

Source: The European House – Ambrosetti on OECD Health data 2015

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Healthcare System Organisational Structure

Essential levels of health care

Hospital care Local care Community care

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% Out of pocket per typology

% Out of pocket spending details

Diagnostics 3,8% Laboratories 4,4%

Visits 15,4%

Dental care 23%

Gynecological care

Source: The European House – Ambrosetti on ISTAT data 2015

Dental care

Diet care

Dermatologic care Ophtalmic care Orthopedic care

Drugs 53,4%

Healthcare System Out of pocket spending focus

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Healthcare Delivery System

Different levels and services

hospital care

secondary &

tertiary care

primary h.care &

pharma. service

• general practitioners • capitation basis payment

• list of drugs covered • small co-payment

• public structure

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Healthcare System Forecast

Future challenges, new dynamics and the pressure on the welfare system

Ageing of the population and the increase of the involvement of the public structure

Technological development and higher costs

Pressure on the healthcare budget due to the economic crisis

Potential re-emerge of infective illnesses previously destroyed

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Thank you for your attention! Key Topics We Discussed:


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Benefit Scenario

Summary of Health Care

System

Summary of Pension System

Summary of Social Security

Benefits

Country and Company Info &

Background


www.unipolsai.com

Contact Info

Stefano Pochini

Life Department

0039/ 0554792645 [email protected]

Sergio Tonero

Broker Sales Department

0039/ 0251815195 [email protected]

www.unipolsai.com

UNIPOLSAI ASS.NI SPA UNIPOLSAI ASS.NI SPA

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