Pensions: on retirement, a choice between six options to prioritise duration or flexibility

Until yesterday, members to the supplementary pension scheme had essentially two types of benefits to choose from upon retirement: the payment of the accrued balance as a lump sum or in the form of a life annuity. Now, three further benefit options have been added, with characteristics and durations that fall between those of the first two.

Generally speaking, a member may immediately withdraw, as a lump sum, up to 50 per cent of the total contributions they have accrued. This figure may rise to 100% if the life annuity generated by converting no less than 70% of the accrued capital is less than 50% of the state pension. This may occur in the case of a total amount that depends on various factors, but which is generally less than approximately 80,000 euros. Those who joined a supplementary pension scheme before 29 April 1993 may also be eligible for 100%, regardless of the amount of the life annuity.

If only part of the lump sum is taken as a capital payment, the remainder may be received in the form of a life annuity and, from today or from 31 October, as a fixed-term annuity, or as withdrawals, or as a series of instalments.

The pension can take various forms, and the member chooses their preferred option upon retirement. Usually in the basic version it consists of the payment of a regular allowance which is paid until the person’s death. However, the member may also opt (in return for an annual pension amount that is generally lower than that provided for in the basic version) for additional features, such as a survivor’s benefit, in which case the payment is also made to the designated survivor, or a guaranteed payment for a predetermined period (usually 5 or 10 years) regardless of survival, after which it becomes a life annuity. Alternatively, a supplement may be provided in the event of loss of self-sufficiency, or the member may opt for supplementary insurance, which allows the remaining capital to be paid out in the event of the pensioner’s death.

Under the founding legislation, the with a defined term provides for the payment of a periodic allowance throughout the estimated remaining lifespan at retirement, according to ISTAT data confirmed by COVIP. If the beneficiary dies before then, the remaining capital is paid to any person designated by the beneficiary. If the policyholder lives longer, payments cease after a certain point. Let us assume that at the age of 67, the estimated remaining life expectancy is 18 years. The annuity will be paid until the age of 85. However, Covip has stipulated that this annuity may also be taken out for a period exceeding the estimated life expectancy; in our example, perhaps 25 years, up to the age of 92.