Veterans Affairs Committee on April 20th, 2009

[The Chair, Conservative, David Sweet]

Good afternoon, ladies and gentlemen.

We are continuing our study of the comparison of veterans services within the G-8 as well as the Commonwealth. We're very thankful to have General Bonotto with us today.

Welcome, General. I see that you have a PowerPoint presentation for us, live and in colour. Can I ask you how long your presentation will be?

[Brigadier-General Sanzio Bonotto, Brigadier-General, Italian Defence Attaché, Embassy of the Italian Republic in Canada]

It will be about 20 minutes to half an hour.

[The Chair, Conservative, David Sweet]

Our tradition is to give you the time for your presentation and then go through the rotation of the different political parties. They'll have a chance to ask you questions.

General, thank you very much for taking the time to address the committee.

[BGen Sanzio Bonotto]

Thank you.

Ladies and gentlemen, good afternoon. I'm the Italian defence attaché and it's a pleasure and an honour to be here today in front of the committee to give an overview of the Italian military pension system.

First of all, I want to apologize for my accent and my poor English. I'll try to do my best to be as clear as possible. If I'm not clear, just ask me and I'll try again.

The Italian pension system is not easy to understand because it has suffered numerous changes in recent years. If I were to go to the office to ask for my pension, it would take a couple of hours just to give me an idea of how much my pension is. It's not too easy.

Before I begin with the pension system, I'd like to give you a short presentation about our organization and about how people can join the Italian armed forces. I want to give you a brief description of the Italian enlistment system.

For the officers, enlistment is through the academy and by public competition. After the academy, the officers are in permanent staff service. Based on their specialization, there is a conscription period when they must stay in service. For other officers--I'm talking about the public competition--after a period of two or three years, mainly, they can join the permanent staff service through an internal competition. After that, they have a period of conscription that will be at least 5 years and that could be 10 or 15 years depending on the specialization.

For non-commissioned members, there can be enlistment through the public competition from the volunteer personnel, or VP4. I will try to explain why we have VP1 and VP4. These are Italian acronyms, but I will try to explain them in English. Since 2005 we haven't had mandatory conscription, so the lower rank of service is granted through voluntary conscription and also public competition, whereby the people can join the armed forces.

After one year of conscription, they can apply for another period that lasts for at least four years. After four years, they can, through an internal competition, join the permanent service and maintain the same lower rank as a serviceman or go to the sergeant or the warrant officer ranks. After that, they can stay in the service until the maximum age for retirement.

Now I will say a few words to explain the Italian defence organization. The organization chart you see is of our defence organization as it has been since the 1997 reform. Put under the actual commander in chief, the chief of defence staff, are all the chiefs of single services. Before 1997, all the chiefs of the army, navy, and air force--the carabiniere was under the army--could speak with the minister as well as with the chief of defence staff. After the reform of 1997, the single services were put under the command of the chief of defence staff. At the moment, our chief of the defence staff is General Vincenzo Camporini.

In looking at the chart, you can see the chief of defence staff, and also the NAD, national armament defence, which is in charge of procurement, research, and so on. For these kinds of matters, he can speak directly to the minister. For other matters such as operational matters or to buy something that is operational, we have to go to the chief of defence staff to ask what he needs in regard to a mission or the operational staff and so on.

The chief of defence staff has two headquarters. One is the general operations headquarters that is responsible for all the operational issues. The Joint Command Special Forces is another operational command. There is also the defence general staff for policy and for the staff he needs.

Mainly, the numbers you can see in the chart are roughly about what they were last year. Now we are going to change, because we are going to reduce our budget by 30%, so the people are also going to be reduced. We are going to reduce to 180,000 people, more or less. Here, in the chart, we are at 190,000, more or less. We are going to reduce again in the future.

Now we'll take a fast look at out-of-area operations. Italy is involved in operations abroad, with more than 9,000 people in 21 countries. These numbers don't include the auxiliary personnel of the Red Cross, the Finanza guard, police, and other personnel that are not part of the defence ministry. Now we are going to look at the military personnel in out-of-area operations and at how they are treated in cases of disabilities. I'm speaking of operations as in the theatre of operations, not in place like Brussels or Canada. We are talking about places like Iraq, Afghanistan, and so on.

Our organization has stipulated that there be insurance with a private company and pays a premium for every single person involved. We pay the premium depending on the rank and the individual specialities of the person. Accordingly, the compensation is different for every single person. The premium that our administration pays each year is about four to five million euros.

In the next slide, you can see, in an approximate way, the value of the compensation. For death or permanent disability, it is up to 10 times the annual gross wage, but not more than a million and a half euros. In the case of death, the insurance has to pay 100,000 euros within 10 days. For medical services, there is a reimbursement for medical services received within six months, up to 10,000 euros, and so on.

The insurance paid for an event is to a maximum of 60,500,000 euros, so this means that if a lot of people, 100 people, are killed during an event, the insurance doesn't pay more than one million euros for each person. In a case of the use of weapons of mass destruction, the amount used is up to 10 million euros for each event. An event means that if something happens, it's in 24 hours. Somebody can endure an event that lasts only 10 minutes, but there are some fights that can last one day. An event is 24 hours, so if the event lasts 10 days, it's 10 events that the insurance has to pay for.

Now we are going to focus on the subject of the presentation, which is the Italian military pension system. The first great reform occurred from 1991 to 1995, with a period of transition that served as a buffer between two different pension systems. Since 1995, we have had minor changes, like the minimum period of service or age for retirement. As you can see in the slide, pensions were based on a retributive system in the past. They were calculated on the last salary. Don't look at minus 15 years, because I will be talking about that later.

For personnel on duty before 1991 with more than 18 years of service, the pension is calculated on the amount of the last salary. Currently, for the personnel on duty between 1991 and 1995 with more than 18 years of service, pensions are calculated on two amounts. The first is from before December of 1993 and the other is from January of 1994 and the amount is A plus B. It's a little bit complicated, but I hope to be clear about it later.

In the future, it will be completely different. Personnel who enlisted after January 1996, or with less than 18 years of military service on December 1995, will have their pensions based on their welfare contributions, which is about 33% of gross salary. Of that 33%, 8.80% is paid by the individual and 24.20% by the state. But the full amount is 33% of the salary.

Now we are going to see the meaning of “years of service”, both effective service and pensionable service, because they are different. In respect of the years of effective or pensionable service, it's possible to have a right to a pension. Looked at in this light, there is also bonus service. This means that there is one year for every three or five years of effective service, depending on their specialization: flight, shipping, operations, war campaign, and others. But the maximum bonus must be five years, starting from 1998. That is the maximum number of years that people can gain.

I enlisted before 1972, so I was able to gain seven years of bonus service. My bonus service is seven years, but I have not had have any further bonus service since then because the maximum is five years.

Now we're going to look at the end of service causes. It will be possible to have a pension when one reaches the end of one's service. You can choose the service because you have reached the pensionable age. There is the old age pension. As of 2008, the age for a pension is 60 for everybody. The age of 65 is for higher ranks, such as three-star generals and so on. After 20 years of service, which is the basic period, the pension is 44% of salary.

The maximum pension they can have is 80% of salary after 40 years. People can stay in service for more than 40 years. If they join the armed forces at 18 and stay until they are 60 years of age, they can work for more than 40 years, but the maximum pension is based on 40 years of service. The other years of service would disappear and are only good for another kind of benefit, which I will tell you about later. We have a retirement pension at 53 years of age for military personnel and at 57 years of age for people in public departments. People can retire and get a pension. The pension is based on 40 years of service.

Another cause for leaving the service is the inability to serve. There are two kinds of inability to serve. The first is not related to service, so the pension in this case is based on the period served. The minimum is 15 years of pensionable service or 12 years of effective service. You can see that it's possible to have 15 years of pensionable service, but if people have only 10 years of effective service, they don't have a right to the pension.

The other type is related to service. A pension is always guaranteed after one, two, or three years. The amount is in relation to the degree of disablement and is calculated based on the following: on last salary plus 10%, or on one of eight categories of disablement, as shown in the chart. A committee decides on the category of the disablement.

The most favourable treatment for the personnel will be applied. If they have the maximum pension of 80% after 40 years, the most favourable would be only the first and second categories. The other categories are less favourable. So I would have a pension based on the last salary, plus the first or the second category; otherwise, I could choose the last salary plus 10%. If I have the minimum pension based on 44% of my salary, the sixth category is the most favourable in the table; otherwise, the 10% would be more favourable.

In regard to servicemen's pensions, these are pensions for servicemen who served without receiving salaries. We are talking about a period of conscription when young people had to serve the state and received just a small salary or no salary at all. The table shows the amount of pension servicemen would receive in the case of injury or disablement. Like the previous system, it is based on categories, with eight categories. This is also for the men who served in the First World War, although now there are't any, and in the Second World War. If you have any disablement, this is the pension you will receive. If you don't have a disablement and you served during the war, you don't receive this pension.

There is another cause for end of service. If the death is not related to service, the pension given to the survivor, of course, is based on the welfare contribution. We are talking about 33% of the gross salary paid during the last five years of duty. This pension is given to the spouse at 60% or at 80%, with 60% to the spouse and 20% to the child. You can see the percentages in the table.

If the deceased person is single and there are parents or siblings, the pension is given to them, but not all the time. It depends on whether the people were under his protection and so on. Otherwise, the parents or the sister or the brother don't get any pension.

Next we have pension related to service, the first category of pension. Think about the table you saw before. The first pension category is salary plus 100%, paid for three years to the surviving spouse and children. For the amount after three years, you have to look at these tables. The 60% for the spouse depends on the amount of the contribution the person has given to the state, but after three years, it changes a lot.

There are other bonuses for the people who leave the armed forces. In regard to the auxiliary service, when people go on pension with the maximum pension, they can go to the auxiliary service, but during this period people can be called back into service. The auxiliary service lasts for five years. The salary, or the amount given to the person, is the pension plus 70% of the difference between the service salary and the amount of the pension.

There's a difference between the salary when I'm in service and when my pension is given to me or to the people who are in this kind of service. After five years, the pension is recalculated with the new amount of salary, because I have worked for another five years. After this period, the auxiliary people go to the reserves. The reserve has a normal pension and the amount is indexed to the cost of living, like the other public pensions in the public compartment.

When I receive a pension, I have another bonus--I paid for the bonus--and that is called the golden handshake. That is based on one-twelfth of 80% of the annual salary multiplied by years of pensionable service, not years of service, but years of pensionable service. That takes into account the fact that I probably have more years of service, because I gained more years. As I mentioned, I gained seven years of pensionable service.

There is another kind of compensation, another indemnity, for death or disablement in service. This came from the police forces. It is during acts of terrorism.

The government has also decided to identify military people as victims, because some military forces work with military police against terrorism. So military people can now receive this kind of economic benefit if something should happen. It would be better if it didn't happen, of course, but it's now possible for people who are injured or who have some kind of disablement during their service to receive benefits.

As you can see, it's not only against terrorism; it's also against crime, policing, civil or military facilities surveillance, search and rescue activity, public safety protection activities, and intervention and deployment, including non-combat zones. So if you go into Afghanistan, Iraq, or Iran, and are injured, and your disablement is more than 80%, you can have this kind of benefit.

The bonus amount for more than 80% disablement is 200,000 euros. Then it's 2,000 euros for every percentage point of disablement. The monthly pay is 260 euros. I've also listed other kinds of benefits for people who've had something happen during their service.

This ends my presentation. I hope I was clear. If I wasn't clear, I'd be glad to answer your questions.

Thank you very much.

[The Chair, Conservative, David Sweet]

Thank you very much, General. We really appreciate your time. One of the things you've demonstrated to us is that when you're trying to do a comparison of service, it's not easy. Italy has a very unique system in and of itself. Of course, that's our challenge here, with this committee.

We'll now go to questions.

Madam Foote, for seven minutes.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

Thank you.

Thank you for your presentation. I listened with great interest, but I have to tell you that at some points I almost felt like interjecting; I got lost in terms of the definitions of service and the different categories.

I'll start by asking you about your PowerPoint presentation. In your section on insurance for personnel deployed in operations, you talk about the different compensation amounts awarded in terms of three categories: death or permanent disability, death, and medical services.

You've referenced death in two instances there. Could you explain the difference? What's the difference in terms of being compensated in terms of death or permanent disability and then just death? One pays up to 10 times the annual wage and the other one pays 100,000 euros within 10 days.

[BGen Sanzio Bonotto]

The first amount is what the insurance will give you in total. The other is what is issued in case of death. Ten days after the event, the insurance has to give 100,000 euros. But in the end, you will have the first amount.

So in the case of death, the insurance has to pay 100,000 euros, and then has to give you the difference.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

I'm sorry, I'm just having difficulty understanding the difference between the two.

Let's go on to medical services. It says in here, “reimbursement for medical services received within 180 days”. You're talking six months here. So those impacted have to pay the costs up front for up to six months?

[BGen Sanzio Bonotto]

The insurance has pay the costs up front. In Italy, not all the.... Health is public, but we have to pay for some things. The insurance has to pay an amount that covers the costs of medicals and so on.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

So the insurance will pay that?

[BGen Sanzio Bonotto]

Yes. The state insurance covers the public service, and you have medical service, of course, but--

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

So the state pays it for six months before the insurance does?

[BGen Sanzio Bonotto]

No. The insurance pays, because the cost of medical drugs is not paid by the state. If you go to the doctor, sometimes the state pays 50%, so the difference has to be paid by the insurance.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

Okay.

[BGen Sanzio Bonotto]

So the people don't have to pay anything for 180 days.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

All right. Thank you.

[BGen Sanzio Bonotto]

Just to be clearer, if you are badly injured, the insurance has to pay one million euros. The insurance has to pay at least 100,000 euros cash and then the difference between one million euros after one year or after six months.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

Okay.

[BGen Sanzio Bonotto]

It's not really different. After 10 days, the insurance has to pay to cover 100,000 euros, and then they have to give you the difference.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

They have to move within 10 days.

[BGen Sanzio Bonotto]

Yes. In the case of death, they have to pay 100,000 euros within 10 days.

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

Okay.

[BGen Sanzio Bonotto]

Then, afterwards, they have to give the survivors the difference between that amount and the compensation figure. Is that clearer?

[Judy Foote, Liberal, Random—Burin—St. George's, NL]

Yes. That's clear.

Let's move to years of service. I'm looking at effective service and bonus service. I'm just wondering about the bonus service. What's the financial benefit of the bonus service?

[BGen Sanzio Bonotto]

For this kind of benefit, you have to pay. We pay the institute of welfare every month.

Every month, I pay an amount of my salary to the institute of welfare. When I gain this kind of years, I don't pay anything. I have to apply and pay for this year. That is not in my salary. This benefit comes after 35 years of service. Then you have five years of bonus and reach 40 years of service. This is the difference. After 35 years of effective service, I can go onto the retirement pension, because I have 40 years of service. It's 35 years of effective service plus five years of bonus, totalling 40 years of pensionable service, and then the benefit is 40 years.