September 21, 2022

What INPS does not tell you about your future pension

When will I retire? What will my pension amount be? 

These are the two questions that every worker asks, because the quality of future life depends on these answers .

You got it right: unfortunately the state pension NPI NUMBER alone is not enough to have a happy life and it is good to tell you this immediately.

But let’s proceed in order.

What is the orange INPS envelope.

The Orange Envelope initiative was born in 2016 and was promoted by INPS to inform workers about their future retirement .

This service was used to find out the expected date of retirement, the last salary, the value of the first pension check and the replacement rate .

We will talk about this last datum, that is the difference between the income as an employee and the amount of the pension.

The orange INPS envelope

Why is the simulation of the pension calculation important?

I’ll tell you right away: knowing well in advance what the social security check will be offers the possibility of immediately realizing the pension gap and integrating it adequately.

Too bad that this initiative immediately retired (the pun is so good that I leave it).

To replace the orange envelope we have thought of another service, again from INPS.

What’s your name?

My future retirement: simulating your own retirement. Different name but identical objective to the orange envelope.

Do you want to know how this service works? I’ll tell you right away.

My future retirement: the INPS simulation.

My future pension  is the service that allows you to simulate what your pension will be at the end of your work activity.

The calculation is based on the legislation in force and on three fundamental elements: age, work history and salary or income.

They can use the service:

  • workers with contributions paid to the Employee Pension Fund;
  • workers with contributions paid to the Separate Management;
  • those enrolled in the Executive Management of industrial companies;
  • workers with contributions paid to other funds and managements administered by INPS.

The service allows you to: 

  • check the contributions that are paid into INPS and notify the Institute of the missing contribution periods through the contribution reporting function; 
  • know the date on which entitlement to an old-age or early pension matures; 
  • calculate the estimated amount of the “constant currency” pension, ie regardless of the inflation trend; 
  • obtain an estimate of the ratio between the first pension installment and the last salary (replacement rate);
  • hypothesize the suspension of work, by entering the date on which to interrupt the work activity;
  • modify the forecast of future GDP (+ 1.5% or + 1% annual increase in the medium-long term) and one’s annual salary / income trend (from 0% – settled to 5% – brilliant);
  • choose the fund on which to base the simulation.

The service also allows you to build your future pension by comparing different scenarios and carrying out simulations.

It’s possible:

  • verify the incidence of different salaries by modifying the salary for the current year and the annual percentage trend;
  • estimate the economic effect of a postponement by varying the retirement date; 
  • combine the variables of pay and retirement date.

To access the service, just register on the INPS website.

Do you want to live a happy retirement? Do the INPS simulation to find out what your future income will be.

As I told you before, the calculation of the future pension serves above all to understand how much the social security allowance decreases compared to your current standard of living.

Why is it important to know how much the pension gap is worth?

Knowing how much my pension decreases with respect to income serves to understand how much to integrate and how to do it to have an adequate standard of living.

Inps future pension: six things not to be underestimated.

If you have read carefully and have come to this point, you will know that you can calculate the value of your future pension, which will be very low and will not be enough to enjoy your old age .

The intention of INPS is certainly positive to sensitize taxpayers to the need to equip themselves with a supplementary pension solution .

However, as emerges from a recent study carried out by Progetica for Corriere Economia, the results of the simulation hide a problem.

Which?

The forecasts are overly optimistic and now I’ll tell you why.

 the inflation rate.

The inflation rate considered is very far from reality .

This value is entirely theoretical, even if it corresponds to the target set by the ECB.

I say that it is very theoretical because the average inflation figure for the year  2020 is equal to -0.1% , the previous year ( 2019 ) the average recorded was  0.6% . The average of the last 12 months is equal to -0.1% .

What does low or negative inflation mean?

It means that the contributions paid for the pension do not re-evaluate.

Inflation data for the past 20 years. Far below 2% or even in negative territory.

 the career.

The calculation is based on a constant career hypothesis , i.e. imagining the fantastic career of the 70s and 80s.

Unfortunately, the case of a career with “contribution gaps” due to interruptions in work or illegal work is increasingly frequent.

Also in this case a superficial analysis of the data provided by INPS can lead to very negative effects.

 income growth.

The simulation assumes an ever-growing career .

The growth in salary estimated by the INPS simulator is equal to 1% per year in real terms.

In practice, this means that a 30-year-old worker would arrive at the time of retirement, at 65, with a salary that has risen by 42% compared to current levels.

I am an optimist by nature, but today it is already a lot to hope to keep a shred of salary.

 taxation.

The projections of the pension calculation simulator are shown gross of taxes .

Again, the estimate is much higher than reality, unfortunately. I don’t mean to rage, but taxation could reduce your income by as much as 30%.

 future pension reforms.

The pensions of tomorrow will be paid by the workers of tomorrow. Too bad there are fewer and fewer workers and more and more elderly.

The government has repeatedly revised the social security system downwards to keep the social security castle standing.

The result was a reduction in the average amount of pensions paid.

Conclusions

At the end of this long study on the INPS system for calculating the future pension you could easily ask yourself this question:

But if the data is very optimistic, is it worth doing the pension calculation?

My answer is absolutely yes and the task of this INPS tool must be to raise awareness among citizens on the subject of social security.

Right after you have experienced your pension situation first hand, the most important part comes.

You need to start thinking about a “plan B” for your retirement.

Saving money for retirement is a long-term goal and I already know what you’re thinking:

Oh well but there are so many years to go that there is always time to start!

We are serial procrastinators, but this case with each passing day without starting to accumulate money for your retirement will cost you dearly in the future.

Do you want an example?

To have a € 1000 pension, a 25-year-old would have to set aside 200 each month.

What would happen if you chose to postpone the choice to join a pension fund and only remember at 40?

What would happen if procrastination was king even at 40 and pushed him to shrug and postponed the choice to 48?

Well, at 48, he would discover that to hope for a pension of € 1000 per month he would have to set aside € 1000 per month.

Ok Mario, but are you doing these examples to scare me?

Not at all, indeed it is a way not to make yourself make the classic mistake of when you think about a long-term goal.

There are things in life that should not be postponed and time must be an ally that must play in our favor, not a sword of Damocles from which to escape.

Seize the opportunity to learn more about how to build your supplementary pension effortlessly.

Request your free consultation now and find out how to start your growth path to be a happy retiree.