Italian first pillar pension funds (Casse di Previdenza) have paid last year €2.6bn in taxes, including €640m linked to returns on investments, the association of private pension funds Adepp said in a report highlighting the amount and the impact of levies on pension schemes.
Alberto Oliveti, Adepp’s president, said that more than €600m per year of taxes on investments is already above the level paid in other European countries, “where it is clear that if you invest your assets to pay pensions that will be taxed, assets must not in turn be cut”.
The largest amount of taxes was paid as personal income tax (IRPEF), amounting to €1.85bn, the report added.
The tax regime applied to the Casse di Previdenza in Italy causes “distortions” through a double taxation on returns achieved and benefits made up also of returns on investments, according to Adepp.
This implies that returns are taxed twice, in the accumulation phase, and when pensions are paid out, including both contributions and returns, it added.
Italy is among the outliers in Europe, where the majority of the member states (17 out of 24) adopt an Exempt-Exempt-Taxed (EET) regime, with contributions and returns on investment exempted from taxes. Only three states, including Italy, have adopted the ETT (Exemption-Taxation-Taxation) model.
Casse di Previdenza have been calling on the government to introduce a more beneficial tax regime, for example a selective taxation tested during the COVID-19 pandemic.
The president of Inarcassa, the €13.5bn first-pillar scheme for self-employed engineers and architects, said recently that the tax regime in place penalises the schemes pressed to invest assets in Italy to support the domestic economy.
Adepp’s report also underlines that first-pillar pension funds operate in Italy in a context of declining birth rates, an aging population, economic, social and occupational instability, insufficient investments to train workers, the collapse of numbers of people enrolling in universities, an unappealing job market, and an “exit only” country, referring to the migration of skilled workers to other EU countries.
Investments in Italy wane
Italian first pillar schemes invest 36% of their total assets – which amount to €104bn at the end of last year – in Italy, the report said, adding that assets under management (AUM) fell in 2022 from €107.91bn in 2021.
Assets held in Italy by the schemes amount to 52% of the total AUM, if counting also liquidity, insurance policies and “other assets”, it added. Investments in Italy are conducted mostly via Alternative Investment Funds (€15.97bn), government bonds (€9.2bn), and real estate (€2.74bn), it added.
However, the share of assets invested in Italy has steadily decreased over the years, as pension schemes opted for broader diversification, return opportunities, and active management of risks, it said.
Foreign investments through, for example, UCITS (Undertakings for Collective Investment in Transferable Securities), offer easier and more diversified access to international markets, Adepp said.
Assets are invested mostly in securities (€3025bn), other types of investment funds (€24.99bn), equities (€18.1bn) and government bonds (€15.44bn), including €9.2bn in Italian government bonds, according to the report.
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