Supplementary pension funds are forms of supplementary retirement provision. They are designed to supplement the state pension and build up additional income for retirement in the long term. In Italy, this is referred to as the ‘second pillar’ of retirement provision. The legal basis is primarily Legislative Decree No. 252/2005.
What is a supplementary pension fund?
A supplementary pension fund collects contributions from the employee and, where applicable, contributions from the employer. Often, severance pay, i.e. the TFR (trattamento di fine rapporto), is also paid into the fund. The accumulated amounts are invested by the fund and later paid out as a supplementary pension or, in part, as a lump sum. The individual position depends on how much has been paid in, the duration of membership and the returns achieved by the fund.
What types of supplementary pension funds are there?
In Italy, there are various forms of supplementary pension provision:
- closedend or collective agreement funds, which are often provided for in collective agreements;
- openended funds, offered by banks, insurance companies or asset managers, for example;
- individual pension plans (PIPs), individual pension arrangements offered by insurance companies and implemented through life insurance policies.
For the employer, the most important factors are whether the applicable collective agree-ment provides for a specific fund and whether an employer contribution is required.
Role of severance pay
Employees can generally decide whether the severance pay accruing in future remains with the company or is transferred to a supplementary pension fund. If the severance pay is transferred to a fund, it is no longer paid out by the employer upon leaving the company, but becomes part of the individual’s pension provision. The severance pay is transferred to the fund on an ongoing basis; the exact payment dates depend on the specific fund.
For employees who were first subject to compulsory insurance after 28 April 1993, the entire accruing severance pay is transferred to the fund when they join a supplementary pension scheme. Employees who were already subject to compulsory insurance prior to this, however, may transfer only a portion of their severance pay into the supplementary pension fund.
New rules from 1 July 2026
From 1 July 2026, new rules will apply to new employees in the private sector. If no express decision is made within 60 days of hiring, an automatic allocation to supplementary pension provision may apply.
Within this period, the employee can decide whether the severance pay should remain with the company or be paid into a supplementary pension scheme. For employers, it will therefore become even more important to properly inform employees and document their decision.
Tax benefits
Contributions to supplementary pension funds are tax-deductible. From the 2026 tax year, the annual maximum amount for the tax deductibility of contributions has been raised from €5,164.57 to €5,300. This applies to both the employee’s and the employer’s contributions. Severance pay is not included in this limit.
The contributions paid reduce the employee’s taxable income. As a result, income tax is calculated at a lower rate and less payroll tax is payable.
In addition, voluntary contributions may be paid into the fund. These may be taken into account in the tax return within the statutory maximum limits.
Payment of the supplementary pension fund
The supplementary pension is generally paid out once the requirements for the statutory pension have been met, provided that the conditions of the relevant fund are also satisfied. The benefit may be paid as a regular supplementary pension or, within certain limits, as a lump sum.
When paid out, the accumulated amounts are taxed at a favourable rate. The tax rate is generally 15% and may gradually decrease to 9% in the case of longer participation.
Early withdrawal
Under certain conditions, employees may also apply to withdraw funds from the supplementary pension fund before retirement. Typical cases include significant medical expenses, the purchase or renovation of a primary residence, or other personal needs within the statutory limits.
In certain cases, withdrawals of up to 75% of the accumulated balance are possible; for other reasons, up to 30%.
What do employers need to bear in mind?
For employers, supplementary pension provision is primarily a matter of correct payroll processing and proper application of the collective agreement. In particular, the following must be checked:
- which collective agreement applies;
- whether a specific pension fund is designated;
- whether an employer’s contribution is due;
- how employees must be informed about severance pay (TFR) and supplementary pension schemes;
- how contributions are correctly processed via the payslip.