The pension fund it is by no means the only way to protect one’s future, but those who ask themselves the problem deserve praise for their far-sightedness. “It is clear that there is a need to set up a pension plan, but the means must be chosen well: if I have to go from Milan to Naples by taxi, to say, perhaps it is not convenient for me”, he says Daniele Cottino, known on the web as Giacomo Saver, «Former repentant banker», independent financial investor through the site segretibancari.it. “The important thing, in short, is not to confuse the idea of social security coverage with the instrument”. Because the pension fund may be convenient for some, as well as the choice of transferring the severance pay, but for others there are much more effective tools to build a wealth to enjoy (deservedly) at the end of the professional path.
What exactly are pension funds?
«A form of supplementary or supplementary pension. In other words, they serve to supplement the pension from the public welfare system, which since 1995 has become leaner, given that we have moved from a system in which the annuity was related to the last salary, to that in which it is instead compared to the contributions paid in the ‘time span ».
What do they invest in?
«The pension fund was created in the image and likeness of a common investment fund, therefore it has different management lines – often 4, 5 or even 6 – divided by risk profile. You can choose guaranteed line funds, actually insurance products; prudent; moderate; balanced; aggressive. Pension funds usually invest in financial instruments, often in investment fund units, or in ETFs. It all depends on the chosen risk profile, which can in any case vary over time “.
One of the advantages is the tax deductibility …
«Exactly, up to 5,164 thousand euros per year, the equivalent of the old 10 million lire. The other side of the coin, however, is that we are condemned to collect the accrued only at retirement age. On which there is no control, on the other hand, given that it continues to increase ».
On retirement, however, what happens?
“You get a monthly income, obviously on the basis of what has been paid over the years and the interest accrued. However, if, upon maturity, 70% of the contribution amount converted into an annuity does not exceed half of the social allowance established by INPS (in 2022 it will be equal to 468.10 euros for 13 months, ed), it is possible to collect the entire sum. This is why, paradoxically, the pension fund would be more suitable for people over the years, to enjoy tax deductibility and finally collect all the capital, thus aiming at a more fiscal – indeed – than social security operation. Those who subscribe to a pension fund as a young person, on the other hand, will surely reach an important amount over the years that will prevent them from collecting the full sum, in the meantime condemning themselves not to be able to access their capital (apart from any advances, however penalizing) “.
So, despite the widespread belief, it is not a useful tool for young people …
“It’s a great idea to start building your own retirement capital when you are young, but these funds aren’t necessarily the solution. Also because they are rigid, once you get in, you never get out. And, I repeat, no matter what happens, you cannot access your capital until retirement age “.
When is it convenient to pay your severance pay to the pension fund?
«Only in a specific case, and that is if the company you work for is small. In fact, the law requires employers to set aside each year the severance pay accrued by employees, but in the event of budget liabilities they may not do so. If the company fails, so to speak, in the end there is a risk of not perceiving it at all. Transferring it to the pension fund, on the other hand, means forcing the company to pay it annually, thus eliminating the risk of losing it. In all other cases, however, employees advise against it. In general: I would pay only the minimum required to the pension fund, in order to be able to incorporate the employer’s contribution, possibly adding something just to enjoy the tax deductibility. But nothing more ».
What are the alternatives to guaranteeing a peaceful retirement?
«Fund accumulation plans, which are cheap, and ETFs on global equities are in my opinion the best alternatives. As well as traditional low-cost funds. Over long periods, in fact, it is precisely the costs that make the difference: staying below 1% is essential ».
What minimum amounts should you pay?
“About 2 thousand euros at a time, because otherwise you pay quite high bank costs. I would recommend a monthly provision – on post office book, deposit account, second online current account – to psychologically “eliminate” the sum for retirement every month. Then, when you get to two thousand euros, you invest in the savings plan. And so on”.
Let’s say we are 30 years old, and want to build a pension income of two thousand euros a month by the time they are 65 …
“Assuming we still live for twenty years, this is an amount of half a million euros. Assuming a 6% return, it is a question of paying 300 euros per month for 35 years. Maybe a little less, but let’s say it’s a good approximation ».
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