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Pension Calculation
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Pension is one of the most important aspects of a worker’s life. For this reason, it is important to understand pension calculation. This allows you to estimate the value of your monthly INPS check and better plan for your future.
The Italian pension system
The Italian pension system is based on two pillars:
The first pillar is the public pension system, managed by INPS. In this system, the pension is calculated based on the contributions paid by the worker during their working career.
The second pillar is the supplementary pension system, managed by pension funds. In this system, the worker can choose, starting from the TFR, to also pay additional contributions to those paid to the first pillar.
Public pension calculation
The calculation of the public pension is based on several factors. The main ones are:
- Retirement age: the retirement age is the age threshold at which one can access the old-age pension. The retirement age is currently set at 67 years, but it is expected to increase in the coming years.
- Contribution years: contribution years refer to the number of years in which contributions have been paid into the pension system. The minimum contribution years to access the old-age pension is 20 years.
- Contributions paid to INPS: the amount of contributions paid to INPS is a fundamental variable in determining the future pension allowance.
The transition from the earnings-based system to the contribution-based system
1969
The earnings-based system for calculating benefits came into full effect with the Law of April 30, 1969, n. 153.
In the earnings-based model, the pension is commensurate with the salaries received in the last years of activity. The financial sustainability of the system essentially depends on the balance between active workers and pensioners.
Over the years, the constant aging of the Italian population together with demographic trends have marked the crisis of the earnings-based model, initiating its review process.
1995
The Law of August 8, 1995, n. 335 on “reform of the mandatory and supplementary pension system” (known as the Dini reform) introduces the contribution-based calculation system, providing for its total application to all insured persons starting from January 1, 1996.
The contribution-based system directly correlates what is paid in with what the individual will receive. The accumulated contributions are converted into an annuity through transformation coefficients calculated based on the retirement age and the consequent life expectancy.
2012
The transition to this model was completed with the entry into force of the Law of December 22, 2011, n. 214 (known as the Fornero reform).
The contribution-based system was indeed extended to all seniority accrued from January 1, 2012, with the application of the “pro rata” calculation.
How to simulate your pension
Pension simulator:
a useful resource
To get a clear view of your financial future in retirement, you can use a pension simulator.
A pension simulator is a useful resource for workers who want to plan their pension accurately. You can run different simulations to understand how prospects vary based on investment choices. This way, you will be better prepared to make informed decisions.
Supplementary pension calculation
The calculation of the supplementary pension is based on the sum of contributions paid by the worker and contributions paid by the employer. Each CCNL provides, against the minimum contribution of the worker, a contribution entirely from the company. In this regard, we remind you that contributions from the employer are due only in the case of membership in category pension funds.
Planning for retirement
It’s important to plan your pension well in advance, so you can make the right decisions to ensure a peaceful future. Here are some tips for planning your pension:
- Calculate your pension: the first step is to calculate the pension you will receive from the public pension system and the supplementary pension system.
- Assess your needs: think about how much money you will need to live on in retirement.
- Consider your financial situation: evaluate your savings and income.
- Make an investment plan: a pension fund is not the only way. But it is by far the most accessible!
Pension calculation: discover the Fondapi simulator
The Fondapi pension simulator is a very useful tool. It offers a wide range of features to help users plan their pension future accurately and in an informed manner.
