We all think about it someday. Let’s be honest: there comes a moment in our professional life when we have to deal with retirement. If, when and how retirement will come is something we do not like to deal with, yet it should be carefully tackled. It is also an evolving sector where insurance companies, and startups as well, are getting engaged with a number of solutions.
Propensione is one of them. Innovative start-up that offers tailored advice to choose and purchase insurance and supplementary pension products, operates as an online insurance broker specializing in retirement provision and is registered as a broker in the Register of Insurance Intermediaries. The startup, founded in Trieste in 2016 and running since March 2018, is led by Alberto Maturi as President and Giancarlo Scotti, co-founder of the project, both experienced managers in the financial and insurance industry.
An insurtech for supplementary retirement: why Propensione first arises and how it works
Propensione’s goal is to serve as the online reference advisor on supplementary retirement provision.
The supplementary pension is one of the strategic areas for Italy and for the main European countries. To date, 70% of eligible persons in Italy have not yet joined a form of supplementary pension scheme. However, the pension fund is a targeted, protected and flexible savings product and, above all, it offers a range of advantages in terms of tax benefits. In addition, the supplementary pension plan is tailored to demand and not to supply. As such, on the one hand, it is perfect for online distribution and, on the other hand, it minimises distribution costs by using digital tools as a distribution channel.
This is the background to Propensione.it, a digital company with a specific target group made up of employees aged between 25 and 55, decision-makers, employees in the public or private sector, self-employed and on-liners. These are 5.2 million Italian working people, representing 23% of the overall workforce over 18 (22.5 million).
With a view to providing users with tailored advice on how to choose among the many pension products on the market, the company has developed a 6-step process to identify the most suitable supplementary pension product based on users’ personal and professional profiling. Starting with an in-depth analysis of the public and supplementary pension situation of the users, the pension gap is identified and a proprietary algorithm crosses the data of the users with the data of the affiliated funds, suggests the most suitable investment sector and offers a fund ranking. The next step is to identify the most suitable solution for the profile and purchase the product directly on the website Propensione.it. Finally, in case of any changes in needs, the customer will continue to be supported in its path.
The application offers a gradual approach to the issues of supplementary retirement plans through digital tools, providing the information and resources needed to choose the best products offered by the market with a clear understanding of the matter. An insurtech, therefore, that represents the innovative synthesis of the meeting between the financial-insurance industry and the digital sector, making expertise and know-how just a click away.
10 reasons to subscribe to a pension fund
Propensione.it heavily relies on user information. Many people, especially the youngest ones, are still not aware of what a “pension gap” is – the uncovered gap between last income and the pension.
The report “Previdenza, qual futuro?” carried out by Ania in partnership with Gfk revealed how few people have a clear idea about the amount of their future public pension; this lack of information gives rise to the greatest fears. In addition, the report found that those who were better informed decided to implement the supplementary pension scheme in due time (21% increase in pension savings for those who received the orange envelope and +15% for those who did the online calculation on the INPS website). That’s why on its website, the startup has published the reasons why it is convenient (and worthwhile) to subscribe a retirement fund.
- Supplement your basic public pension
Supplementary pension plans provide additional resources to supplement public pensions.
- It’s flexible
Supplementary retirement provision is a form of targeted savings that maximizes its results over time, as it is flexible, since the amounts invested can be changed according to needs, capital and returns are re-evaluated and tax benefits are accumulated.
- Tax advantages
The tax system of the supplementary pension scheme is preferential compared to any other investment instrument, first and foremost because the State encourages its joining.
The annual contributions paid into the supplementary pension scheme are deductible from the income tax return for IRPEF purposes, within the maximum limit of €5,164.57 per year. For young people at their first employment there is an additional bonus of € 2,582.29 per year, from the fifth annual contribution to the pension fund and for the following 20 years.
The tax saving consists, therefore, in the reduction of the taxable income, since the levies paid are deducted, resulting in lower IRPEF (personal income tax) to be paid.
In addition, further tax benefits are provided:
The returns obtained from the financial management of the pension fund are taxed by applying the substitute tax on income at a rate of 20% instead of the 26% normally applied to other forms of investment.
There is a tax reduction also during the disbursement of the supplementary pension, whether it will be paid as a pension and / or capital. A withholding tax is levied at a maximum rate of 15%, which is lower than the IRPEF rates applied to total income (ranging from 23% to 43%). From the 15th year on in any supplementary pension scheme, the rate will be further reduced by 0.30 percentage points for each subsequent year, up to a further 6 percentage points in total (essentially from 15% to 9%).
Payments made to a family member who is “tax dependent” may also be deducted.
All these benefits result in a higher amount of supplementary pension.
- A safe fund
The savings implemented with the supplementary pension plan are strongly covered and protected, both by the bankruptcy of the company (bank, insurance company, asset management company or investment company) and by any creditors of the member.
- The degree of risk/return of the investment is freely chosen
The supplementary pension system works according to the mechanism of capitalization: the paid-up amount is invested in the financial markets, and the accrued capital plus the returns thereof, at the end of the plan, results in the supplementary pension.
Each pension fund provides different management units to pay contributions to, each one depending on the degree of risk/return according to the financial instruments it comprises.
- COVIP, the law protects the investments
COVIP (“Commissione di Vigilanza sui Fondi Pensione” or Pension Fund Supervisory Commission) is the self-governing administrative authority responsible for monitoring the proper functioning of pension fund systems to protect pensioners and their welfare savings. The Supervisory Authority works to protect the transparency of the system and the compliance with the regulations.
Supplementary pension schemes operating in the financial markets are like other forms of investment, although the law provides for specific criteria and prudential limits to investments when dealing with pension purposes which pension managers must comply with.
- Pension fund: redemption and advance payment
The pension fund is flexible in using the accrued resources. While the primary purpose of protecting the standard of living at retirement must be maintained, the latter can also be used to meet other important needs:
advance payment of the pension fund: a part of the accrued amount can be claimed in advance, up to 75% for health care costs or purchase/restructuring of the first house and up to 30% for any other requirement; the redemption of the pension fund: 50% or 100% of the accrued amount can be claimed in the event of loss of employment or permanent disability.
Finally, with a view to broader social security protection, two further measures are envisaged in favour of the heirs or other beneficiaries: the redemption in the event of death before retirement and the possibility of turning the supplementary pension to the survivor.
- Early retirement: is it possible?
With the latest budget law, the usefulness of supplementary pension provision has become even more extensive: the amount accumulated with the pension fund can be received before the retirement provided for in its public scheme in the form of Temporary Early Supplementary Pension (RITA).
If inactivity occurs at an age close to retirement (in the previous five years) or even ten years earlier if inactivity occurs for more than two years, RITA provides a sort of “bridge income” between the interruption of employment and the date of retirement, enabling early retirement.
- Free-choice in the design of supplementary pensions
By joining a form of supplementary pension, the subscriber actively and freely designs his/her own supplementary pension, given the flexibility of the system:
Free-choice of the pension fund to join, even if the insured person has a reference category of pension fund;
Free-to-change pension funds if needs evolve over time, shifting the accrued fund position to the chosen one without limits and retaining all tax advantages;
Free-choice of the management sector where the funds paid are to be invested;
flexibility in the amount of contributions, methods, variability and suspension of payments;
for employees, the right to contribute or not their own severance indemnity rather than leaving it in the company;
- An online consultant for retirement provision
Propensione.it offers a comprehensive consulting service, designed for guidance in the field of supplementary pensions. Being informed and taking the right decisions is essential: thanks to the Pension Guide section all the answers to each question can be found.
PEPP: supplementary pension provision with a European “passport”
Propensione is also informing its users about PEPPs, an acronym of Pan European Pension Product whereby the overview of the European supplementary pension scheme will be enriched with a new product.
These are European individual pension products that will complement the existing products of national schemes. The PEPPs can be signed by everyone: employees, self-employed, students and will have the same characteristics throughout the European Union. Their creation responds above all to the needs of the so-called smart workers, always looking for flexibility and a product designed for a labour market featuring increasing mobility.
Why a European pension market?
The European Union aims to reduce the fragmentation of the capital market which prevents suppliers from maximising risk diversification, boosting innovation and economies of scale and thus offering low-cost pension products.
Against this backdrop, PEEP is a European pension product that can create a pan-European framework for pensions.
The proposal is not intended to replace or harmonise existing national schemes, but rather to create a parallel European voluntary savings system which, through the creation of a quality label, can increase the confidence of European consumers in individual pension products.
The idea is to achieve a safer and more cost-effective, affordable and transparent market.
In addition to the lower costs resulting from the efficiency of a less segmented market, consumers will benefit from the portability of PEPPs among Member States. PEPPs will be portable within the European territory thanks to a “passport” simplifying their cross-border distribution.
In addition, tax advantages will be granted to PEPPs. The way ahead is not yet clear but, together with the Regulation, the Commission has also issued a Recommendation encouraging all Member States to give the PEPPs the same tax regime as national individual pension schemes.
The European supplementary pension market: facts and figures
The E&Y report on a European framework for individual pensions, carried out in 2017 upon request of the European Commission, points out that the value of the supplementary pension market in Europe, worth €700 billion in 2017, is likely to increase to €1,400 billion in 2030 without PEPPs being introduced and to €2,100 billion with PEPPs being adopted.
27% of the 243 million European citizens aged between 25 and 59 have already joined the supplementary pension scheme by 2017.
Pepp: Future retirement for future workers?
According to Propensione.it team, Pepps are the best way to create a global “trademark”. A cutting-edge product, suitable for a population always on the go and for future workers looking for flexibility in the labour market. That’s why Pepps should be available online, to be easily available to everyone.
However, the challenges are still to be met, first and foremost the applicable tax system: Member States will have to commit to applying the recommendations given at European level in a harmonised way with national products as well.
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