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Pensions: the three pillars

Retirement income in Europe usually comes from three places, called pillars. Knowing yours shows how much is left to you.

The three pillars

The first is the state pension, paid from today’s workers’ contributions. The second is a workplace plan. The third is your own saving. Each country leans on them differently.

Why the third grows

Europe is getting older: fewer workers pay for each pensioner. Many countries have raised retirement ages and linked pensions to contributions, so the state part replaces less of a salary than it did.

In Italy

Employers set aside 6.91% of gross pay each year as TFR. A worker can send it to a pension fund, often with an employer top-up. Contributions cut taxable income up to a yearly limit, and the payout is taxed at 15%, falling to 9%.

Across borders

Since 2022 the EU has a Pan-European Personal Pension (PEPP) that can move with you between countries. Few providers offer it so far, but it shows where pensions are going.

Key takeaways

  • State, workplace and personal: three pillars.
  • The state part is shrinking as Europe ages.
  • Workplace plans often come with tax help and employer money.