On November 20, 2024, an important directorial decree was published, adopted by the Ministry of Labor and Social Policies in collaboration with the Ministry of Economy and Finance. This decree establishes the biannual review of the transformation coefficients of the contribution amount, with application from 1 January 2025.
This update affects different categories of workers and is intended to adjust pensions to current demographic and economic conditions.
What changes are expected? And how will these updates affect pensions and their calculation?
Read on to find out all the details.
Advertisement – Advertising
Contributory calculation: how it works and why it is central
The contributory system, introduced to ensure greater equity and sustainability in the long term, bases the calculation of pensions on the amount of contributions paid during working life. Upon retirement, the contributory amount accumulated is transformed into income using the transformation coefficients, which vary based on the age of the worker.
This mechanism takes life expectancy into account: the more it increases, the longer the pension payment period will be and the lower the annual amount of the annuity will be.
Thanks to the biennial review, the coefficients are updated to reflect demographic and economic dynamics, ensuring a balance between what is paid and what is disbursed over time. This system turns out to be crucial for maintaining the stable social security budget, in a context of an aging population and constant evolution of income subject to contributions.
Advertisement – Advertising
New transformation coefficients for the two-year period 2025-2026
From 1 January 2025, the new transformation coefficients will be applied, an essential tool for calculating pensions according to the contributory method. These coefficients determine the annual income due to a pensioner, transforming the accumulated contribution amount into a pension amount based on the retirement age.
Their update, carried out every two years, takes into account economic dynamics (such as the GDP growth rate) and changes in life expectancy, both being fundamental to guarantee the balance and sustainability of the social security system.
For the two-year period 2025-2026, the transformation coefficients vary as follows:
| Age | Dividers | Values (%) |
|---|---|---|
| 57 | 23,789 | 4.204% |
| 58 | 23,213 | 4.308% |
| 59 | 22,631 | 4.419% |
| 60 | 22,044 | 4.536% |
| 61 | 21,453 | 4.661% |
| 62 | 20,857 | 4.795% |
| 63 | 20,258 | 4.936% |
| 64 | 19,656 | 5.088% |
| 65 | 19,049 | 5.250% |
| 66 | 18,441 | 5.423% |
| 67 | 17,831 | 5.608% |
| 68 | 17,218 | 5.808% |
| 69 | 16,600 | 6.024% |
| 70 | 15,980 | 6.258% |
| 71 | 15,360 | 6.510% |
As can be seen from the table, the values increase with retirement age, since the contribution amount is distributed over a smaller number of expected retirement years. For example, those who decide to retire at 57 will use a coefficient of 4.204%, while for those who postpone retirement until 71 the coefficient rises to 6.510%.
This system encourages workers to extend their careers to benefit from a higher income.
The importance of the new coefficients is not limited to individual calculation: they also represent a structural adaptation to address the increase in longevity and the resulting challenges for the pension budget.
Advertisement – Advertising
Practical example: pension calculation
Let’s consider a worker with a contribution amount of 200,000 euros. Let’s see how the annual pension varies based on retirement age, using the transformation coefficients for the two-year period 2025-2026.
- Retirement at 62
The transformation coefficient at age 62 is 4.795%. The annual pension will be:
200,000 × 4,795/100 = 9,590 euros/year
This amount will be received every year for the duration of the pension. - Retirement at 67
By delaying retirement to 67, the coefficient rises to 5.608%increasing the annual pension:
200,000 × 5,608/100 = 11,216 euros/year - Retirement at 71
If the worker chooses to retire at 71, the coefficient further increases to 6.510%. The annual pension will be:
200,000 × 6,510/100 = 13,020 euros/year
Analysis of choices
With a contribution amount of 200,000 euros, the worker can choose between:
- Retire at 62 with 9,590 euros per year;
- Wait until age 67 to obtain 11,216 euros per year;
- Postpone to 71 yearsobtaining 13,020 euros per year.
This example highlights how delaying retirement leads to a significant increase in the annual amount, but spread over a reduced number of years. The decision therefore depends on personal needs, life expectancy and individual priorities.
Advertisement – Advertising
How to plan your retirement in light of the new coefficients
The revision of the transformation coefficients makes it even more important to carefully plan the moment of retirement. The choice of the age at which to retire from work is not only a personal question, but also an economic one: the new coefficients clearly show how postponing retirement can significantly increase the annual income received.
For example, a worker who decides to retire at 62 will use a transformation coefficient of 4.795%, while delaying retirement to 67 will benefit from a coefficient of 5.608%. This means that the accumulated contribution amount will be transformed into a higher pension per year, a factor that could make a big difference especially in the case of long years of contributions.
To optimize your pension plan, it is advisable to consider several factors:
- The amount of the contribution amount: The higher the contributions paid, the higher the final pension will be.
- Personal life expectancy: Health and family aspects may influence the decision.
- The transformation coefficients: Monitoring the biannual updates helps you choose the most advantageous time for retirement.
- Personal and family needs: Consider your lifestyle and the financial support required.
Furthermore, it is useful to consult a pension expert or your pension institution to obtain precise simulations of your future pension, comparing different retirement age hypotheses.
