Resolution CM/ResCSS(2016)10
on the application of the European Code of Social Security
by Italy
(Period from 1 July 2014 to 30 June 2015)
(Adopted by the Committee of Ministers on 6 July 2016
at the 1262nd meeting of the Ministers' Deputies)
The Committee of Ministers,
In the exercise of the functions conferred upon it by Article 75 of the European Code of Social Security (hereinafter referred to as the “Code”), and with a view to supervising the application of this instrument by the Contracting Parties;
Whereas the Code, opened for signature on 16 April 1964, entered into force on 17 March 1968 and since 21 January 1978 has been binding on Italy, which ratified it on 20 January 1977;
Whereas, when ratifying the Code, the Government of Italy stated that it accepted, in addition to the parts which must be applied by every Contracting Party (Parts I, XI, XII, XIII and XIV), the following parts of the Code:
– Part V on “old-age benefit”,
– Part VI on “employment injury benefit”,
– Part VII on “family benefit”,
– Part VIII on “maternity benefit”;
Whereas, in pursuance of paragraph 1 of Article 74 of the Code, the Government of Italy submitted its 30th annual report on the application of the Code, for the period from 1 July 2014 to 30 June 2015;
Whereas, in accordance with paragraph 4 of Article 74, that report was examined by the ILO Committee of Experts on the Application of Conventions and Recommendations, at its 86th meeting in November and December 2015;
Whereas, at the request of the Governmental Committee of the European Social Charter and the European Code of Social Security (“Governmental Committee”), at its 127th meeting (27-31 May 2013), the ILO undertook a comparative study on the methodology for the selection of the standard beneficiary and the determination of the reference wage, where all the options envisaged by Articles 65 to 67 of the Code were calculated for the same reference period and elaborated a detailed “Technical Note” on “Determination of the reference wage” and “Income and poverty indicators and standards” for each Contracting Party to the Code;
Recalls that the ILO Conclusions on the application of the Code and its Protocol for the period 1 July 2014 to 30 June 2015, accompanied by the above-mentioned “Technical Note”, updated by the ILO in 2015, were transmitted to the government representatives of Contracting Parties to the Code in view of discussion and adoption of the draft resolutions on the application of the Code and its Protocol at the 133rd meeting of the Governmental Committee, 9-13 May 2016;
Recalls the Committee of Ministers’ decision taken at the 531st meeting of the Deputies that the supervision of the application of the Code and Protocol will call for the submission of a detailed report every five years and of four general reports in the intervening years;
Recalls that the information which the government is requested to provide in its next detailed report (due by 31 July 2016) for the period 1 July 2015 to 30 June 2016, as well as relevant statistics since the last detailed report (2011), will be examined by the ILO Committee of Experts at its next meeting in November/December 2016;
Notes,
I. concerning Part V (Old-age benefit):
a. with regard to Article 26(2), pension age above 65 years, the report indicates that due to the pension reform introduced by Law No. 122 of 30 July 2010, the retirement age has been increased significantly, reducing the number of new pensioners by 32 per cent compared to 2011. According to article 12, paragraphs 12bis and 12quater of the Law No. 122/2010, the Decree of 16 December 2014 of the Ministry of Finance states that, with effect from 1 January 2016, age requirements to qualify for old age and early retirement will be increased by four months in line with life expectancy. The retirement age for employees enrolled in the General Mandatory Insurance (AGO) and/or in its substitute funds will be, from 1 January 2016 to 31 December 2017, 65 years and 7 months for women, and 66 years and 7 months for men. In the period from 1 January 2018 to 31 December 2020, the retirement age for women will reach the current retirement age for men (66 years and 7 months), which in the meantime will be automatically increased in line with the growth in life expectancy. The report also states that, when deciding to increase the age of retirement, the Italian Government had taken into account the requirements of the Code and Convention No. 102 as to the dependency ratio and the working ability of elderly persons in the country. The ratio of residents over 65 years to residents aged 15 to 64 is at least three times higher than the minimum of 10 per cent established by the Code. In the past 40 years, the life expectancy of a 65-year-old male has risen, in absolute terms, from 13.475 to 18.556 years or by 37.7 per cent, and of a 65-year-old female, from 16.624 to 22.014 years or by 32.4 per cent, which shows that the state of health of persons aged 65 years or older has improved considerably to justify the increase in retirement age. The Committee of Ministers takes due note of the government’s explanations and the statistical data justifying the increase of the pension age beyond 65 years;
b. with regard to Article 28, new rules of pension calculation, that pursuant to section 24(2) of Law No. 214/2011, contribution periods accrued as from 1 January 2012 will be calculated according to the notional defined contribution system. Pension for workers who on 31December 1995 have accrued at least 18 years of contributions, is calculated according to the mixed system and therefore the amount is determined by the sum of: (a) the part of the pension derived from pension contributions accrued on 31 December 2011 and calculated according to the earnings-related system (pay-as-you-go); and (b) the part of the pension derived from pension contributions accrued as from 1 January 2012 and calculated according to the notional defined contribution system. There is no change as regards persons who have accrued less than 18 years of contributions on 31 December 1995 for whom the mixed calculation system has already been established before the Law No. 214/2011. The Committee of Ministers notes that the simulation of the pension calculation takes into account the current legislation, age, working history and salary of the insured person, and permits calculating the estimated amount of the pension both in real terms and as a replacement rate compared to the last salary;
II. concerning Article 29(2)(a), reduced benefit after 15 years of insurance, that for workers insured after 1 January 1996 (defined-contribution system), the minimum qualifying period is 20 years (1,040 weeks) of contributions, provided that the amount of pension must not be less than 1.5 times the minimum monthly amount of social allowance (€663.45 in 2013). As both these conditions of entitlement are not in line with the Code, the Committee of Ministers has previously asked the government to explain: (1) how the right to a reduced old-age pension after 15 years of contributions established by the Code was ensured in the Italian law for workers insured after 1 January 1996; and (2) what happens if, after 15 or 20 years of contributions, the amount of the worker’s pension is still less than 1.5 times the minimum monthly amount of social allowance. In reply to these questions, the report states that workers insured after 1 January 1996 with less than 20 years of contributions are entitled to a pension at the age of 70 years and 7 months (from 1 January 2016 to 31 December 2018), if they have accrued at least five years of effectively paid contributions, regardless of the amount of the pension. Moreover, any citizen without accrued contributions, in financial need and with an income situation specified by the law, is entitled to the “social allowance” which is a social assistance benefit. The Committee of Ministers observes from these explanations that the present legal design of the defined contribution pension system effectively deprives the workers insured after 1 January 1996 of their right acquired under Article 29(2)(a) of the Code to a reduced old-age pension at the statutory pension age after having completed a maximum qualifying period of 15 years of contributions. The fact that the person concerned in this situation may be entitled to a means-tested social assistance benefit or to a social insurance pension if he/she lives to an age higher than the statutory age, important as it may be for certain categories of the persons protected, will remain irrelevant for other persons protected under Part V of the Code who will have no pension rights whatsoever during the period of four years separating the statutory retirement age from the age of 70 years and 7 months, when the law will allow them to claim a pension with insufficient years of contributions;
III. concerning Part XI (Standards to be complied with by periodical payments), Articles 65 and 66, determination of the reference wage:
a. the report states that the method used to determine the reference wage of the standard beneficiary concerns a level I and III male workers in metal industries in manufacturing comprising “Manufacturing and processing of metal products except for machinery and mechanical appliances” and “Manufacturing of machinery and mechanical appliances”. In 2014, the wage (including the share of the 13th and 14th month’s wage) of a male level III worker in metals industries was €1,919.05 per month and €23,028.60 per year, and of a male level I worker €1,577.30 and €18,927.58 respectfully. With regard to the source of data, the wages of metal workers distinguished by job level were evaluated on the basis of the National Collective Labour Agreement (CCNL) and the index of contractual wages. To obtain the wage data regarding only male workers, an estimate was made on the basis of the wage variation by gender observed on the National Institute of Social Security (INPS) statistical database. Thus, according to the report, the method used for determining the reference wage of the standard beneficiary under Articles 65 and 66 of the Code is considered correct. The Committee of Ministers notes the government’s statement as well as the fact that the method of determining the reference wage described in the report is not transparent and is based on certain estimates made on the basis of data which is not accessible by the Committee of Ministers;
b. concerning the fact that the wages of level I and III workers in metal industries determined by the government are substantially lower than the average gross wage of an unskilled and skilled male worker determined on the basis of Eurostat data under option (b) of Articles 66(4) and 65(6) respectively, the report points out that the data comparison is not homogeneous: Eurostat data are collected from a sample relating only to enterprises employing more than ten workers and includes the 13th and 14th months’ salaries, periodic bonuses, overtime and other elements that are not included in the report based on the National Collective Labour Agreement (CCNL). The Committee of Ministers observes that this statement is inexact and refers the government to the above-mentioned “Technical Note”, transmitted to the government, for details;
The Committee of Ministers notes that, with regard to Article 65, the government is using option (b) of its paragraph 6, choosing a level III worker as a person deemed typical of skilled labour in the divisions of manufacturing industry, which, according to the data given in the above-mentioned “Technical Note”, transmitted to the government, have the largest number of male employees, that is “Manufacturing and processing of metal products except for machinery and mechanical appliances” (share of male employees – 14.5 per cent) and “Manufacturing of machinery and mechanical appliances” (share of male employees – 12.8 per cent);
c. with regard to Article 66, the government is using option (a) of paragraph 4, choosing a level I worker as a person deemed typical of unskilled labour in the same divisions of manufacturing industry;
IV. concerning the adjustment of the benefits in payment, Article 65(10), the report states that benefits are adjusted annually according to the average change in the cost of living index calculated by the National Institute of Statistics (ISTAT). With respect to pension adjustment in 2012 and 2013, the report indicates that the Constitutional Court in its Judgment No. 70 of 2015 declared illegitimate paragraph 25 of section 24 of the Decree Law No. 201 of 6 December 2011 (Fornero Law) in the part where it provides for the years 2012 and 2013, a pension revaluation of 100 per cent exclusively for pension amounts up to three times the minimum income supplement (MIS). In order to give effect to the judgment of the Constitutional Court, the Decree Law No. 65 of 2015 amended the rules declared to be illegitimate and established a new mechanism for pension adjustment for pension amounts three times higher than the Minimum Income Supplement. The arrears amounts arising from this new mechanism must be paid to pensioners together with the payment of pension rate in August 2015. With respect to pension adjustment in 2014, the report indicates that the consumer price index for families of workers and employees (without tobacco) showed an increase of 0.2 per cent, while the Minimum Income Supplement (MIS) (monthly average in 2014 – €500.88) was increased by 1.1 per cent. In 2015 adjustment of the MIS to the cost of living was graduated according to the amount granted: pensions up to three times the MIS were increased by 0.3 per cent, while pensions over six times the MIS by 0.135 per cent;
The Committee of Ministers notes from this information that different adjustment rules apply to different benefits and were subject to frequent changes, which complicates the understanding of the overall revaluation of benefits over the five-year period since the last detailed report of the government;
V. concerning the adequacy of social security benefits, the extensive information supplied in relation to the role of social security and in particular of the guaranteed minimum benefits in the reduction of poverty. In view of the complexity of assessing the adequacy of benefits, the ILO summarised the relevant information in the above-mentioned “Technical Note”, transmitted to the government. The question of the adequacy of social security benefits under accepted Parts of the Code will be examined on the basis of the comprehensive information provided by the government;
Finds that the law and practice in Italy continue to give full effect to Parts VI, VII and VIII of the Code and that they also ensure the application of Part V, subject to re-establishing the right to a reduced pension after 15 years of contributions;
Decides to invite the Government of Italy:
I. concerning Part V (Old-age benefit), with regard to Article 28, new rules of pension calculation, to calculate, in its next report, the level of the old-age pension of the standard beneficiary with 30 years of contributions under the old and the new rules in order to show that the 40 per cent replacement rate requested by the Code will be reached in all of the above-mentioned cases. It is hoped that the government will be able to use, for this purpose, the new online pension calculator, which the National Institute of Social Security (INPS) has made generally available to the insured persons under the “My pension” project, by making the simulation of the future pension for the standard beneficiary;
II. concerning Article 29(2)(a), reduced benefit after 15 years of insurance, considering that the above-mentioned gap in protection is incompatible with both the letter and the spirit of the Code, to re-establish the right of all persons protected under Part V to a reduced social insurance pension after 15 years of contributions;
III. concerning Part XI (Standards to be complied with by periodical payments), Articles 65 and 66, determination of the reference wage:
a. to explain, in its next report, the process of determining the reference wage step by step, indicating the precise sources and location of the data used from the National Collective Labour Agreement (CCNL), the index of contractual wages, wage variation by gender, etc. The government is requested to provide the description of the tasks performed by level I and III workers in metal industries and compare them to the International Standard Classification of Occupations (ISCO) 08, Major groups 9 (Elementary occupations) and 7 (Craft and related trades workers);
b. to explain, in its next report, the purpose of combining the above-mentioned two divisions of manufacturing industry together if taking only the first with the biggest share of male employees would have been sufficient under the Code;
c. with regard to Article 66, to confirm, in its next report, that wages of level I and III metal workers are the appropriate proxies for the wages of the unskilled and skilled workers determined by using the International Standard Classification of Occupations (ISCO) 08, Major groups 9 (Elementary occupations) and 7 (Craft and related trades workers). The government is requested to compare the reference wages calculated by the government for 2014 with the reference wages calculated according to the methodology explained in the above-mentioned “Technical Note”, transmitted to the government, under options 2 (Article 65(6)(b)) and 5 (Article 66(4)(b)) on the basis of the data for 2014 obtained from the new Eurostat Structure of Earnings Survey which will be published in spring 2016;
IV. concerning the adjustment of the benefits in payment, Article 65(10), to explain in its next report its policy of maintaining the purchasing power of the benefits in payment as well as giving the pensioners a fair share of the growth of the national economy after the crisis. Taking into account that in comparison with the base year of 2010, the consumer price index for families of workers and employees (without tobacco) had increased at the end of 2014 by 7.2 per cent, to provide full information and statistics in the next report on the adjustment of pensions, since the last detailed report, for the period 2010-16 as indicated in the report form on the Code under Title VI of Article 65;
V. concerning the adequacy of social security benefits, to update and supplement, in its next report, the statistical information in the above-mentioned “Technical Note”, transmitted to the government, and to also include for the same time basis (with reference to Article 65(4) of the Code) updated statistics on social security coverage, amount of the reference wage and calculations of the replacement rate of benefits.