It is now possible to convert a wider range of university studies into pension contributions: from a standard 3-year degree course right up to doctorate studies. The ultimate goal is to allow the country’s workers to prepare for early retirement or to increase their pension checks.
How does it work exactly? Article 20 of Law Decree 4/2019 entitled “Urgent provisions on the Citizen’s income and pensions” introduced this new simplified procedure whereby it is possible to ‘convert’ years spent at university into pension entitlements at a cost of 5,260 euro per year of study, payable in up to 120 monthly instalments and fully tax deductible. The result was that in 2019, the national state pensions agency, INPS, received 37,000 applications from self-employed Italians - three times the number who had registered the previous year. Seven thousand workers from other categories did likewise – double those who applied in 2018.
This boom in applications does not mean that the simplified procedure is right for everyone. The standard way forward, which is income-based, may work for some. Let’s take a more detailed look.
Last year’s law made a larger number of Italians eligible to convert their university studies into pension entitlements, extending the possibility to those who attended university before January 1, 1996. Those who decide on this course of action will automatically enter into the contribution-based state pension system whereby their pension check is calculated purely based on the amount they have paid in during their working life. This contrasts with the salary-based calculation to which some workers in Italy are still entitled. Additionally, in order to qualify for the scheme, applicants should not have paid any pension contributions before December 31, 1995, nor be receiving any other pension.
All kinds of university studies can now be converted into pension entitlements including research doctorates, post-graduate diplomas and courses certified as equivalent to university degrees. Any supplementary years due to delayed graduation will not be counted and neither will periods spent simultaneously in employment and education. However, it will be possible to convert portions of a year for courses shorter than traditional degree courses. Applications can be made for more than one-degree course and for any qualifications gained in foreign universities, as long as they are recognized by Italian universities or are legally valid in Italy.
Converting years spent at university into pension entitlements can be costly and may not be practicable for everyone
So, how much does it actually cost to ‘convert’ a degree in Italy? Of course, it depends on whether people choose the standard or simplified option.
The opinion of Italy’s daily financial newspaper, Il Sole 24 Ore, is that the simplified procedure (costing 5,260 euro per year of study), which is tax deductible, is cost effective for anyone whose annual salary is over 75,000 euro. The tax advantage translates into a 47% discount on the cost of the conversion. For those with lower salaries, the tax benefits of the conversion are less attractive.
The standard procedure is based on the applicant’s salary at the time of the application itself: the cost of the conversion is set at 33% of their current earnings – which is as if they were earning the salary they get today during their university studies. This option is recommended for those early on in their career (when their salaries are generally lower), as the higher their salary gets, clearly the more expensive the conversion becomes.
The scheme is also open to those who have not yet taken up employment and thus have not yet paid any pension contributions. In their case, a flat rate will be applied based on various minimum wage parameters.
In any case, as these conversions may be a complex process, the best course of action is to first get in touch with the national state pensions agency, INPS, to find out more and to understand which option works best. Applications can be made electronically though the agency’s website.