In the post “Why save and above all how to invest in times of crisis?” we talked about the fundamental building blocks to build the saving wisely. Let's go down a little into detail and address the problematic issue of board. Yes, because in the future of many of today's forty-year-olds there is a pension at the age of 70 or almost, with checks on average much thinner than the most recently declared incomes. It is even worse if we consider the thirty and twenty year olds.
It's worth reiterating just how much that is good retirement income is important:
. at the individual level, it serves to maintain one's standard of living when one is no longer of working age, while guaranteeing a margin of safety for the unexpected (which, if you think about it, become a certainty when you are elderly);
. at the public level, prevents a multitude of elderly people from burdening the rest of society.
There are essentially two tools available to savers to “get their retirement”: the mandatory pension , pension integrative. Let's see what it's about.
1) Compulsory INPS pension for seniority or old age
Throughout the working life, part of the salary is made up of the so-called "social security contributions", which are paid to INPS and are used to pay the pensions of those who have already stopped working.
At the end of the working activity, those who have regularly paid social security contributions and have accrued the requisites receive the compulsory pension from INPS. This is what is often called the 'first pillar' of retirement.
The fact that in Italy today there are relatively few young people (who pay contributions) and many elderly people (who receive retirement income) means that the pension paid by the INPS is increasingly meager. As if that weren't enough, it will get worse and worse: the progressive aging of the Italian population means that this system no longer has the demographic conditions to function well.
2) Supplementary (or complementary) pension
To avoid a drastic reduction in income once retirement age is reached, the compulsory pension is not enough, it is necessary to look at the forms of supplementary pension. Let's see what they are, analyzing their main characteristics.
2.1 “Closed” category or corporate pension funds
They constitute the so-called "second pillar" of social security and are also known as "negotiated funds" as they are the result of agreements between trade union organizations and business organizations of specific sectors, companies or categories. For example, the Cometa pension fund is intended for workers in the engineering sector, while Fondoposte is for employees of Poste Italiane.
They are financial products in which both the employer and the employee pay monthly contributions. Employees can allocate the severance indemnity (TFR) and the contribution is favored by tax breaksi. The money accumulated in the funds is managed by specialized companies that use them on the financial markets with various investment lines, called "sub-funds", more or less risky (eg equity, bond or guaranteed). It is the worker who chooses which sector to invest in: a crucial (and therefore revisable) choice for determining one's income as an elderly person - I will return to this topic with a specific post, I think it is worth it.
The capital matures over time thanks to the regular payments and the returns on them obtained by the managers (minus the costs). Let me be clear: a priori, nIt is not known how much the final capital will be, also known as the "upright".
At the time of retirement, the worker has two options: convert the amount into a pension (to supplement that paid by INPS) or redeem no more than 50% of the accrued capital and convert the rest into an annuity (i.e. monthly pension).
Between 75% and 100% of the capital accumulated in the funds can also be redeemed before retirement age for extraordinary reasons: for example in the event of unemployment or serious health reasons. Furthermore, after at least 8 years of payments, for any reason the worker can withdraw up to 30% of the accrued capital.
Pro
. Fiscally convenient
. Moving from the severance indemnity to the category pension fund, the "premium" paid by the employer is collected every year: today equal to about 1,5% of salary
. Professional management
. Extremely low costs
Cons
. Limitation on the total availability of capital during the accumulation of contributions and upon retirement
2.2 Open pension funds and PIP (Individual Pension Plan)
They are aimed at all workers, whether employees or self-employed, of any category or region (in practice they are aimed at those who do not have a closed pension fund) and constitute the so-called "third pillar". They are divided into open pension funds, distributed by banks and financial companies e PIP, sold by insurance companies.
They work in a very similar way to closed-end pension funds, in that the contributions collected and destined for a sector chosen by the saver are invested on the financial markets by the managers with the aim of generating an amount, which is then converted into an annuity upon retirement. Also in this case it is possible to have the redemption of the capital in advance.
The employer's contribution is not automatic, as for closed pension funds, even if employers can decide to contribute to the pension fund, obtaining tax benefits.
Pro
. Fiscally convenient
. Professional management
. The payments can be varied or interrupted and the capital can be transferred to another form of complementary pension
Cons
. Higher costs (over double the average of "closed-end" pension funds)
. The employer contribution is not automatic
. Limitation on the total availability of capital during the accumulation of contributions and upon retirement
2.3 Personal savings plans
It is voluntarily create a personal investment portfolio with the aim of setting aside regularly, for example monthly, an amount in order to build a capital to be used for when you retire. It is a solution that, in view of old age, can be implemented with various financial products such as bonds, ETF, mutual funds, actions, which can also be subscribed through Savings Plans (PAC). Since these are portfolios created in a completely autonomous way, they are not subject to any particular regulation.
An example of portfolios of this type, specially created by Advise Only, are Objective Pensione and Objective Pensione PAC, both freely available on the site (and whose characteristics we have also explained on the blog).
Also on the Advise Only website you will find a portfolio, Objective Income (you will also find a presentation of this portfolio on the blog), created for those who are already retired and need to convert your capital into an annuityi.e. additional income.
Pro
. Low management costs (appropriately selecting the financial instruments)
. Liquidity: maximum freedom in the availability of capital during the accumulation of contributions and upon retirement
Cons
. The management is left to the initiative and the saver
. No special tax breaks
Beware of costs: they are the only certain component of any investment and, on an investment such as the social security one, which can affect a long period, they have a heavy impact. For example, a 1% difference in management costs for a worker who decides to invest 2 euros a year in the supplementary pension scheme for 35 years with a gross annual rate of return of 4%, would have a negative impact of over 26 euros on the total final investment. In practice, in this example, 1% of costs eats up, over the life of the investment, about 18% of the capital destined for retirement!
