Pepp has been operational in Italy as well since August 23
Pepps are a European Supplementary Pension Plan that is characterized by portability open to all member states and because a plurality of market players offers the pension instruments
Supplementary pensions: general profiles
As is well known, supplementary pension provision, in addition to the compulsory pension annuity, allows those who join it, for example, a pension fund, to obtain an additional annuity and, consequently, to face more significant serenity and any difficulties associated with leaving the world of work.
Supplementary pension provision allows individuals to regularly set aside a portion of their savings during their working life to obtain a new income added to the ordinary pension.
As Covip, the Pension Fund Supervisory Commission indicates, every individual, especially at a young age, should consider joining supplementary pension funds.
Joining pension funds, in general, and even better at the beginning of one’s working career, allows, among other things, to:
- accumulate significant savings to form an adequate supplementary pension and cope with any work discontinuities
- be entitled to an employer’s contribution, for employees
- withdrawals from one’s position as an advance or redemption to meet expenses related to special personal needs or situations of labor difficulties
- benefit from specific tax breaks provided for those who join supplementary pension plans
- reduce the taxes payable on income each year as a result of the deduction of contributions made to supplementary pension plans. This last point also applies to dependents.
Pepps arrive in Italy: a look at European pension funds
And indeed, having briefly introduced the topic related to pension funds, it is necessary to open the subject Pepp. In fact, since August 23, the “pan-European individual pension product” has also been operational in Italy.
In a European scenario increasingly devoted to harmonization, the European Union, to give citizens of member states access to new forms of pension products, with Regulation (EU) 2019/1238 introduced the so-called “Pan-European Personal Pension Products.”
Pepps are European supplementary pension plans that complement open pension funds, negotiated pension funds, and national individual pension plans.
The strength of Pepps is the individual pension scheme, complementary to existing public and occupational pension systems and national private pension schemes, characterized by a regime of total portability between EU member states.
In addition, another particularly relevant factor is that Pepps can be offered by a wide range of financial institutions, which includes insurance companies, asset managers, banks, certain financing companies, and certain occupational pension funds.
The benefits of Pepp
Pepp enables EU citizens, who move between member states for work, to maintain without bureaucratic “hiccups” the same social security position, albeit broken down into national “sub-accounts” for each period in different countries.
In essence, Pepp has the advantage of:
- a wide range of operators can offer it
- provide for diversified investment opportunities
- be portable between EU member states
- be transferable from one intermediary to another in the event of a state change.
Attention
We stress that:
- as with domestic instruments, the payment of contributions is voluntarily
- it is not possible to allocate severance pay to Pepp
- icontributions are deductible from income up to 5,164.57 euros
- there is a 20% substitute tax on the returns
- the payment of contributions may continue even after reaching retirement age, provided there is at least one year of contribution to the “Italian subaccount”
Some operational guidance
- The “accumulation” phase
As stated in Article 10 of Legislative Decree No. 114 of August 3, 2022, which sets out the domestic regulation of Pepp, contributions made are deductible from total income for an amount not exceeding 5,164.57 euros.
For calculating this limit, you should consider contributions made to supplementary pension schemes under Legislative Decree No. 252 of December 5, 2005, and employer contributions to pension funds.
- Pepp transfer
Savers that request the transfer with another Pepp provider must apply in writing to their provider according to Article 12 of the decree. The new Pepp provider shall provide written information about the application’s acceptance and the execution of the relevant transfer.
The total fees charged to the saver in Pepp by the transferring Pepp provider for closing the Pepp account held with it shall be limited to the administrative expenses incurred by the Pepp provider and shall be disclosed in advance to the saver in Pepp.
However, the total fees charged may not exceed 0.2 percent of the transferred amounts.
