Supplementary pensions in search of efficiency

Italians are worried about their pensions and risk losing money by relying on inefficient pension funds. This is what emerges from a study by professors Michele Raitano and Marco Di Pietro of La Sapienza University, sponsored by Trade Republic, which shows that 97% of Italians think it is necessary to supplement their public pension in order to live with dignity after retirement. But they do not always know how to do it.

Not only that. 74% of Italians feel negative emotions when they think about their retirement prospects; many fear that the expected retirement age will continue to rise well beyond 70 and 52% of Italians do not have a supplementary pension fund, particularly the unemployed and those on lower incomes, highlighting the unfairness of the current system.

The study shows that global equity ETF savings plans have on average returned 1.8 percentage points more per year than the average private pension fund over the past 20 years, net of management costs and tax deductions. In addition, the most fragile segments of the population, i.e. the unemployed and lower income brackets, are the most likely to lack any form of supplementary pension provision: the public pension system is unfair and lacks simple and accessible private investment instruments. In this respect, the study makes use of a survey conducted by BVA Doxa on a sample of 2000 Italians.

"The increase in the retirement age has displaced private pension provision," comments Prof. Michele Raitano, co-author of the research, "at the current retirement ages, those with stable careers will receive an adequate public pension. For them, the motivation to invest in supplementary pensions depends on the employer contribution and, above all, on the substantial tax advantages, which are generally regressive. On the other hand, those who would need the supplement - precarious workers and the working poor - do not have adequate resources and, therefore, do not participate in the supplementary pension and do not benefit from the tax relief'.

According to the study a positive implication is that 18% believe it is better to supplement their public pension by investing privately in financial instruments. And above all, the younger generation shows a greater propensity to invest independently and in particular to invest in ETFs: respondents under the age of 34 are in fact the most likely to combine a private pension fund with ETF investment (44%) and the most likely to choose an ETF instead of a pension fund (18%). Younger generations have realised the importance of starting to invest early for retirement at low management costs and in a diversified way.