Real wages in Italy have been flat for years, inflation has eaten into purchasing power, and many careers alternate fixed-term contracts with uncovered periods, leaving gaps in the contribution record. On top of that come the conversion coefficients that turn contributions into a pension: from 2025 they fell again, by 1.5% to 2.2% at the same age, because life expectancy keeps rising. And with fewer births, each pensioner will rely on fewer workers funding their pension.
The point is practical, not alarmist: anyone who manages to save something beyond an emergency fund has good reason to build a second pension pillar, and you don't need large sums to start. We explained why time matters more than the amount in another article; here we focus on how to choose the instrument.
Contractual fund, open fund or individual plan: what's the difference?
There are three forms of supplementary pension in Italy. They enjoy the same tax benefits, but they are set up differently and aimed at different people.
Contractual pension fund (fondo negoziale, FPN)
- Who sets it up: trade unions and employer associations, through the national collective agreement (CCNL) for the sector.
- Who can join: workers covered by that agreement and, usually, their tax-dependent family members.
- Costs: the lowest in the system, because the fund is non-profit.
- Employer contribution: provided by most agreements, as long as you pay in your own share.
Open pension fund (fondo aperto, FPA)
- Who sets it up: banks, insurance companies, asset management companies and investment firms.
- Who can join: anyone, individually (self-employed people, professionals, those without a sector fund), or collectively through company agreements.
- Costs: mid-range.
- Flexibility: usually a wider range of risk lines.
Individual pension plan (PIP)
- What it is: a life insurance contract with a pension purpose, offered by insurers.
- Who can join: anyone, individually only.
- How it invests: in a class I segregated fund with capital guarantees, in class III (unit-linked) funds, or a mix of the two.
- Costs: the highest on average, in exchange for more personalisation.
In numbers: according to COVIP, the Italian pension regulator, the synthetic cost indicator (ISC) over 10 years averages around 0.5% a year for contractual funds, 1.3-1.4% for open funds and over 2% for individual plans. That isn't a verdict on quality, but over thirty years the gap adds up.
Which risk lines exist, and how risky are they?
Within each form you choose a risk line (comparto), meaning the investment option. From the most prudent to the most dynamic:
- Guaranteed: invests mainly in short-dated bonds and returns the capital paid in (or a minimum return) at maturity or on certain events. Minimal swings, modest expected returns.
- Pure bond: debt securities only, no shares. Low risk but no guarantee: when interest rates rise, bond prices fall, as 2022 showed.
- Mixed bond: mostly bonds with a share component, roughly up to 30%. Low-to-medium risk.
- Balanced: bonds and shares together, with an equity component of roughly 30% to 50%. Medium risk.
- Equity: mostly shares, over 50%. Wider short-term swings, higher growth potential over the long run.
Why does equity tend to return more over the long run?
Your goals come first: when you'll need the money, how much you can pay in, how far you can watch it fall without changing course. Once those are set, the numbers help. According to the COVIP Annual Report presented in June 2026, over 2016-2025 equity lines returned about 5% a year compounded on average across all forms; balanced lines between 1.9% and 2.9%; TFR was revalued by 2.5% a year.
The reason is simple: shares pay a premium precisely because they fluctuate. Over one year those swings weigh heavily; over twenty or thirty years they tend to even out, leaving the growth of the underlying companies. That's why the equity line particularly suits younger savers: they have a long horizon ahead and, by paying in every month, they also buy units when markets are down.
As retirement approaches, it makes sense to shift the capital gradually towards more prudent lines, so a market fall doesn't hit just before the payout. Many funds offer life-cycle paths that do this automatically. Past returns don't guarantee future ones, but they remain the most solid data we have for comparing options.
Can you have more than one pension fund?
Yes. No rule forces you to pick a single form or a single risk line. Some common combinations:
- The contractual fund for your TFR and the employer contribution, plus an open fund or individual plan for voluntary payments, perhaps on a different risk line.
- A single fund, with contributions split across several risk lines, where the rules allow it.
- A position in the name of a dependent family member, such as a child, who starts building up years of membership.
Two things to watch: the €5,300 a year deduction cap applies to your total contributions, not to each fund; and more positions mean more fixed costs to keep an eye on.
The employer contribution: why the contractual fund starts ahead
If your collective agreement provides for it, joining the contractual fund and paying your minimum share also earns you an employer contribution, often between 1% and 2% of the pay used to calculate TFR. It's extra pay that simply doesn't arrive if you don't join. We also covered this in our article on TFR in the company or in a pension fund.
Italy's 2026 Budget Law strengthened this channel in two ways. Since 1 July 2026, new hires in the private sector are automatically enrolled in the fund set by their agreement, unless they opt out within 60 days. And after at least two years of membership, you can transfer your position to an open fund or individual plan while keeping the employer contribution, on the terms set by the agreement.
What should you look at when choosing a fund?
- The provider. Who set up and who manages the fund, for how long, with what assets and what results, looked at over several years rather than the last one.
- The target audience. A contractual fund is designed for a specific category; an open fund or individual plan for anyone. Check that the form and its risk lines fit your job and your horizon.
- Costs, meaning the ISC. The synthetic cost indicator shows how much costs reduce the return each year, calculated over 2, 5, 10 and 35 years of membership. You'll find it in each plan's cost sheet, and COVIP publishes the official comparison. One extra percentage point a year, over thirty years, can be worth a significant share of the final capital.
- The employer contribution. If your agreement provides one, it is often the factor that tips the balance on its own.
What role does a financial advisor play?
Choosing well at the start is half the job; the other half is following the position over the years. This is where a financial advisor makes a difference, in three ways:
- Data in hand. We have access to costs, returns and the make-up of each risk line, and we compare them against your situation, not an average.
- Early warnings. If costs rise, the manager changes, a risk line no longer suits your age or something doesn't add up, we flag it before the damage is done.
- Less paperwork. In some cases we handle the practical side (joining, transfers, switching risk lines) so you can approach the subject with peace of mind.
The starting point stays the same: understanding where you stand and where you want to get to. Choosing the fund comes next, and becomes much simpler.
