Pensions, here's how much 'supplementary' can help the paychecks of millennials
With a full and continued contribution of supplementary pensions, the gross replacement rate would rise to 7.7% in 2030 and 9.3% in 2040 for private sector employees and 7.7% and 10.2% respectively for the 'self-employed'. In the absence of supplementary forms in 2070 the 'net' replacement rate would not exceed 66.3% for private sector employees and 67.7% for the self-employed
by Marco Rogari
3' min read
3' min read
7.7% more in 2030, 9.3% in 2040 and again 7.7% in 2070. This is how much the replacement rate before taxation, i.e. the ratio between the first pension received and the last salary, would increase for private employees with a prolonged and continuous contribution from supplementary pensions. For the 'self-employed' the growth would be 7.7% in 2030, 10.2% in 2040 and 8.5% in 2070.
The estimate is contained in the latest report of the State's General Accounting Office (Ragioneria Generale dello Stato) on medium/long-term trends in pension expenditure, starting from the so-called 'base hypothesis'. The Mef's experts point out that comparing the values of 2010 and 2070, 'a decrease of 7.1 percentage points, for private employees, and 16.6 percentage points, for the self-employed,' also due to the demographic winter and the full implementation of the contributory calculation method, 'is highlighted', always gross. Without the 'rescue' of supplementary pensions, the reductions (with compulsory pensions alone) would have been 14.8 and 25.1 percentage points, respectively. And a similar effect, the dossier states, is produced on the net replacement rates: in 2070, private employees are expected to reach "a value of 76.5%, compared to 66.3% for compulsory social security alone. For the self-employed, the corresponding values are 85% and 67.7%'.
In other words, in the absence of the contribution of a 'supplementary form', in 45 years' time the net pension amount of a 20-year-old today, even in the presence of a non-discontinuous career, would stop at just over 66% of the last salary in the case of a private employee and 67% of the last income for a self-employed worker. It is no coincidence that the dossier emphasises that 'the contribution of supplementary pensions makes it possible to further mitigate the containment of pension benefits resulting from the introduction of contributory calculation'.
The replacement rate
.The replacement rate is the percentage ratio between the first full year's pension and the last full year's income immediately prior to retirement. The replacement rate can be calculated either gross or net of taxation on pension and salary.
The Basic Assumption of Accounting
.The Ragioneria's simulation in the case of private workers starts from a 'basic hypothesis' obtained by 'suitably modulating the typical case of workers hired before 31 December 1995, subject to the mixed regime, and, in line with the gradual transition to the contribution-based system, starting from 2040, the case of workers hired after 31 December 1995 for whom instead the minimum requirement for retirement occurs three years in advance of old age retirement'. In this way the simulation is calibrated on the three current regimes for access to compulsory retirement pensions: old age retirement with a contribution-based requirement geared to the evolution of retirement age; early retirement, up to three years, under the contribution-based regime; early retirement with the contribution-based only channel, independent of age. All starting from the retirement rules now in force and taking into account forecasts linked to life expectancy. On the self-employed side, 'the age of access to retirement, which configures the basic hypothesis, has been assumed,' states the Ragioneria, 'to be equal to the minimum old age requirement in all three regimes'.
