If the state pension will not be enough for the citizens to live a dignified life when they stop working, what solution can be taken into consideration to think about their own future? Pension funds, at the moment, are the best answer, provided you know how to choose them with intelligence and accuracy, avoiding scams and unpleasant surprises. Here is what it is and how pension funds work.
How pension funds work
HOW PENSION FUNDS WORK
During their working life, working citizens, who are employees or self-employed, pay the State, INPS more precisely, the contributions that will help them receive a pension check when they stop working and have reached the fateful retirement age.
To this day it works like this: the working citizens pay contributions that the state needs to pay current pensions, while those who are now retired have provided during their working life to pay the State essential contributions to pay pensions at the time.
A sort of cycle, in short, but it could be abruptly interrupted if the state does not have enough money to pay everyone's pensions. The theme has become increasingly hot in recent years and even today the debate around pensions is more intense than ever. As things currently stand, and unless the law on the pension system changes as soon as possible, the money that citizens will receive once they retire may not be enough to ensure a dignified life, and this is especially true of new generations.
If the pension, in fact, is calculated on the basis of the salary itself and on the basis of the years of contributions paid, it is clear that, with the crisis in the world of work , future pensions will be at risk or, even worse, it is possible that, if the legislation remains at present, most Italian citizens will not receive any pension, if not a pale allowance equal to a few hundred euros.
To this is added the age- old problem of retirement age which, to date, is still subject to regulatory discussions and could change from one moment to the next, lowering or rising even more than the current one.
What to do then? The most effective answer to this type of problem is given by pension funds , a sort of insurance through which citizens join the pension that will receive a sort of income autonomous and independent from the state provision.
In doing so, the citizens would secure other income, in addition to the pension provided by the state, which, if not satisfactory, would be supplemented by the pension fund money that the worker has paid into their own account through an alternative pension plan .
But what is a pension fund ? And how does it work in detail?
The pension fund , in our legal system, is a tool that aims to guarantee a supplementary pension to be considered side by side to that which is due, under the law, to all working citizens once all the contributions paid have accrued.
The first thing to know about this is that joining a pension fund is free and integrative and differs from the state pension for a fundamental reason. The former has a "pay-as-you-go" system; this means that the contributions paid today are the source from which the State will draw for tomorrow's pensions.
Pension funds, on the other hand, have a "capitalization" system ; this means that the money allocated to a certain fund, and paid by the citizen, will be available to him only, without the citizens having to contribute to the future pensions of others.
To date there are different types of pension funds; the Fondi di Catego ria and the Open Pension Funds . The latter are the result of an agreement between social agreements and arise from initiatives by banks, insurance companies and asset management companies. The former, on the other hand, stem from collective agreements involving companies and trade unions.
THE PHASES OF ACTIVITY OF A PENSION FUND
The assets of a pension fund can be summarized in several stages:
Contribution : citizens pay the money in the chosen fund
During this phase, in general, the amounts can be modified , suspended or resumed at any time as needed. After a certain period of time it is also possible to request the transfer of the money accumulated to another fund.
The fund will undertake to prepare in a timely manner the periodic communications that citizens will receive directly at home, by mail, so as to be able to view the development of their personal practice.
During this phase, citizens can also request advance payments, provided that the motivation is always valid and documented, as in these cases:
Health costs
Purchase or renovation of your home or that of your children
For personal reasons if an average of 8 years has elapsed since enrollment
Citizens can also request a redemption in the following cases:
Unemployment for at least one year (only 50%)
Total and permanent invalidity
Management : resources are invested by qualified entities
Accumulation : individual capitalization and creation of an account on which money will be accumulated over time
Withdrawal : when the pension fund is required to pay the money that citizens have saved and set aside over time
PENSION FUNDS AND TAX SYSTEMS
Pension funds are subject to special tax regimes. For the final services, the law provides for a withholding tax of 15%, which tends to decrease by 0.3% each year and after the fifteenth year of participation in the Fund.
Pension funds are also subject to tax treatment on financial returns, with a tax with a substitute tax of 11% instead of the general rate of 12.5%
CHOOSE THE PENSION FUND
But which pension fund to choose? This is the question that all citizens ask themselves. The first criterion of choice is the direct and indirect cost that is applied to the capital of the pension fund; some are taken directly from the payments made, others are requested indirectly from the assets of the investment line.
The second criterion for choosing a pension fund is the company that manages it ; how much experience do you have on this? What is your story? How do you manage the collected assets? And how do you distribute it? These are all questions that should be made when choosing a pension fund.
It is then necessary to be duly informed on all the modalities of the disbursement of annuity money , for example if there is, or not, the possibility of obtaining a reversible annuity, if there is the possibility to receive an income for a certain number of years and so on.
TAKE OUT A PENSION FUND
To activate a supplementary pension it is essential to adhere to a specific program offered by a Pension Fund. Access can be granted:
Private and public employees
Self-employed workers and freelancers
Subjects without income that are fiscally charged to the family
At the time of accession, private employees can choose whether to also activate the payment of severance pay . In doing so, the savings made by the supplementary pension are corroborated by the employer. Together with the TFR you can also pay personal contributions, in addition to contributions paid by the employer.
It is also possible to opt for a collective membership of the pension fund ; in this way the supplementary pension is provided by the TFR and by the contributions deducted from the payroll.
ELEMENTS TO BE EVALUATED IN CHOOSING THE PENSION FUND
Before choosing to join a pension fund, some elements should be assessed:
The years that are missing from the state pension
Any risks related to the investment
In any case, and whatever your choice, do not forget to read and carefully analyze the information notes, the Rules and the relevant General Conditions .
To view the offer, especially if you are not very skilled in terms of pension, it is very useful to consult the site Covip.it , on the Supervisory Board on pension funds. You will thus be able to access a database that will provide you with all the information regarding available pension funds, returns and the related management costs.
ADVANTAGES AND DISADVANTAGES
Summing up all the information concerning membership of a pension fund, here are the advantages that are expected of a citizen:
Tax concessions provided for each plan
Possibility to have net returns depending on the chosen financial manager
Contribution payable by the employer
No fixed quota obligation if you do not choose to allocate the TFR
On the other hand, here instead what could be the disadvantages :
The fruits of the investment are not immediate but long-term
Participative shares are not tradable on real estate markets
PROTECTION RULES
In order to guarantee the pension investment, the law has established some rules to be respected by both parties:
Obligation to have a custodian bank that takes responsibility for accepting the assets
Identification of managers according to a selection subject to the supervisory authority
Acceptance of rules that prevent conflict of interest
Obligation to indicate the restrictions on investments
Control task entrusted to Covip, the supervisory authority
The Board of Directors of the fund will have extensive management autonomy and may delegate the custodian bank and the management company, in compliance with all the rules that regulate the code of ethics.
HOW TO DEFEND YOURSELF FROM ATTEMPTS AT FRAUD
When it comes to pension funds, fraud and deception are always around the corner. Often, especially at a difficult time like this, it is easy to let yourself be discouraged by the future without knowing exactly what to do. What matters is maintaining the right clarity that will serve you to make the right choice for you and your needs.
Whoever is the entity you are addressing always remember that :
The pension fund is not mandatory or necessarily necessary. If you prefer you can leave the TFR in the company, even in the form of annuity or in securities or postal coupons.
The pension fund is a free choice of the citizen: therefore avoid signing contracts that prohibit the exit from the pension fund.
The pension fund must be secure in real terms, otherwise it is better to let it go
The pension fund policy must be transparent to those who subscribe to it
The Pension Fund must be advantageous from the fiscal point of view for the citizen who signs it
It is better than the contract that does not have too tight time constraints
How pension funds work
HOW PENSION FUNDS WORK
During their working life, working citizens, who are employees or self-employed, pay the State, INPS more precisely, the contributions that will help them receive a pension check when they stop working and have reached the fateful retirement age.
To this day it works like this: the working citizens pay contributions that the state needs to pay current pensions, while those who are now retired have provided during their working life to pay the State essential contributions to pay pensions at the time.
A sort of cycle, in short, but it could be abruptly interrupted if the state does not have enough money to pay everyone's pensions. The theme has become increasingly hot in recent years and even today the debate around pensions is more intense than ever. As things currently stand, and unless the law on the pension system changes as soon as possible, the money that citizens will receive once they retire may not be enough to ensure a dignified life, and this is especially true of new generations.
If the pension, in fact, is calculated on the basis of the salary itself and on the basis of the years of contributions paid, it is clear that, with the crisis in the world of work , future pensions will be at risk or, even worse, it is possible that, if the legislation remains at present, most Italian citizens will not receive any pension, if not a pale allowance equal to a few hundred euros.
To this is added the age- old problem of retirement age which, to date, is still subject to regulatory discussions and could change from one moment to the next, lowering or rising even more than the current one.
What to do then? The most effective answer to this type of problem is given by pension funds , a sort of insurance through which citizens join the pension that will receive a sort of income autonomous and independent from the state provision.
In doing so, the citizens would secure other income, in addition to the pension provided by the state, which, if not satisfactory, would be supplemented by the pension fund money that the worker has paid into their own account through an alternative pension plan .
But what is a pension fund ? And how does it work in detail?
The pension fund , in our legal system, is a tool that aims to guarantee a supplementary pension to be considered side by side to that which is due, under the law, to all working citizens once all the contributions paid have accrued.
The first thing to know about this is that joining a pension fund is free and integrative and differs from the state pension for a fundamental reason. The former has a "pay-as-you-go" system; this means that the contributions paid today are the source from which the State will draw for tomorrow's pensions.
Pension funds, on the other hand, have a "capitalization" system ; this means that the money allocated to a certain fund, and paid by the citizen, will be available to him only, without the citizens having to contribute to the future pensions of others.
To date there are different types of pension funds; the Fondi di Catego ria and the Open Pension Funds . The latter are the result of an agreement between social agreements and arise from initiatives by banks, insurance companies and asset management companies. The former, on the other hand, stem from collective agreements involving companies and trade unions.
THE PHASES OF ACTIVITY OF A PENSION FUND
The assets of a pension fund can be summarized in several stages:
Contribution : citizens pay the money in the chosen fund
During this phase, in general, the amounts can be modified , suspended or resumed at any time as needed. After a certain period of time it is also possible to request the transfer of the money accumulated to another fund.
The fund will undertake to prepare in a timely manner the periodic communications that citizens will receive directly at home, by mail, so as to be able to view the development of their personal practice.
During this phase, citizens can also request advance payments, provided that the motivation is always valid and documented, as in these cases:
Health costs
Purchase or renovation of your home or that of your children
For personal reasons if an average of 8 years has elapsed since enrollment
Citizens can also request a redemption in the following cases:
Unemployment for at least one year (only 50%)
Total and permanent invalidity
Management : resources are invested by qualified entities
Accumulation : individual capitalization and creation of an account on which money will be accumulated over time
Withdrawal : when the pension fund is required to pay the money that citizens have saved and set aside over time
PENSION FUNDS AND TAX SYSTEMS
Pension funds are subject to special tax regimes. For the final services, the law provides for a withholding tax of 15%, which tends to decrease by 0.3% each year and after the fifteenth year of participation in the Fund.
Pension funds are also subject to tax treatment on financial returns, with a tax with a substitute tax of 11% instead of the general rate of 12.5%
CHOOSE THE PENSION FUND
But which pension fund to choose? This is the question that all citizens ask themselves. The first criterion of choice is the direct and indirect cost that is applied to the capital of the pension fund; some are taken directly from the payments made, others are requested indirectly from the assets of the investment line.
The second criterion for choosing a pension fund is the company that manages it ; how much experience do you have on this? What is your story? How do you manage the collected assets? And how do you distribute it? These are all questions that should be made when choosing a pension fund.
It is then necessary to be duly informed on all the modalities of the disbursement of annuity money , for example if there is, or not, the possibility of obtaining a reversible annuity, if there is the possibility to receive an income for a certain number of years and so on.
TAKE OUT A PENSION FUND
To activate a supplementary pension it is essential to adhere to a specific program offered by a Pension Fund. Access can be granted:
Private and public employees
Self-employed workers and freelancers
Subjects without income that are fiscally charged to the family
At the time of accession, private employees can choose whether to also activate the payment of severance pay . In doing so, the savings made by the supplementary pension are corroborated by the employer. Together with the TFR you can also pay personal contributions, in addition to contributions paid by the employer.
It is also possible to opt for a collective membership of the pension fund ; in this way the supplementary pension is provided by the TFR and by the contributions deducted from the payroll.
ELEMENTS TO BE EVALUATED IN CHOOSING THE PENSION FUND
Before choosing to join a pension fund, some elements should be assessed:
The years that are missing from the state pension
Any risks related to the investment
In any case, and whatever your choice, do not forget to read and carefully analyze the information notes, the Rules and the relevant General Conditions .
To view the offer, especially if you are not very skilled in terms of pension, it is very useful to consult the site Covip.it , on the Supervisory Board on pension funds. You will thus be able to access a database that will provide you with all the information regarding available pension funds, returns and the related management costs.
ADVANTAGES AND DISADVANTAGES
Summing up all the information concerning membership of a pension fund, here are the advantages that are expected of a citizen:
Tax concessions provided for each plan
Possibility to have net returns depending on the chosen financial manager
Contribution payable by the employer
No fixed quota obligation if you do not choose to allocate the TFR
On the other hand, here instead what could be the disadvantages :
The fruits of the investment are not immediate but long-term
Participative shares are not tradable on real estate markets
PROTECTION RULES
In order to guarantee the pension investment, the law has established some rules to be respected by both parties:
Obligation to have a custodian bank that takes responsibility for accepting the assets
Identification of managers according to a selection subject to the supervisory authority
Acceptance of rules that prevent conflict of interest
Obligation to indicate the restrictions on investments
Control task entrusted to Covip, the supervisory authority
The Board of Directors of the fund will have extensive management autonomy and may delegate the custodian bank and the management company, in compliance with all the rules that regulate the code of ethics.
HOW TO DEFEND YOURSELF FROM ATTEMPTS AT FRAUD
When it comes to pension funds, fraud and deception are always around the corner. Often, especially at a difficult time like this, it is easy to let yourself be discouraged by the future without knowing exactly what to do. What matters is maintaining the right clarity that will serve you to make the right choice for you and your needs.
Whoever is the entity you are addressing always remember that :
The pension fund is not mandatory or necessarily necessary. If you prefer you can leave the TFR in the company, even in the form of annuity or in securities or postal coupons.
The pension fund is a free choice of the citizen: therefore avoid signing contracts that prohibit the exit from the pension fund.
The pension fund must be secure in real terms, otherwise it is better to let it go
The pension fund policy must be transparent to those who subscribe to it
The Pension Fund must be advantageous from the fiscal point of view for the citizen who signs it
It is better than the contract that does not have too tight time constraints
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