There are private pension funds in Italy, although they've been rather slow to take off due to their limited tax advantages when compared with those of many other EU countries.
Since 1st January 2001, anyone who invests in either a pension fund or a qualifying insurance policy (previdenza) has been able to deduct premiums of up to 12 per cent of their taxable income up to a tax-free limit of â‚?,170. Premiums are deducted at your top rate of tax. Employees must also take account of their employers' contributions and must allocate to their pension fund an amount of their termination payment (trattamento di fine rapporto/TFR or liquidazione) equal to 50 per cent of contributions. Employees hired for the first time after 23rd April 1993 must allocate all their TFR to a pension fund.
The increased value of a pension fund is taxed at 11 per cent (called a substitute tax), instead of the usual rate of 12.5 per cent for financial income (see Capital Gains Tax on page 31. Benefits (prestazioni) paid by pension funds are taxed at 12.5 per cent, net of the substitute tax already paid. Pension funds are authorised to pay a lump-sum capital amount of up to 50 per cent on maturity; the other 50 per cent must be taken as an annuity.
You should obtain professional advice before investing in a pension fund or insurance policy, particularly as the legislation regarding private pensions is recent and liable to change.
This excerpt has been republished with permission from Survival Books. Some of the information may apply to EU citizens only. If you would like to get the inside track on moving to Italy, pick up your copy of this great book by clicking here.