Fifth Pension Assignment: What It Is and How It Works

Often there is the need to have small or medium numbers, to satisfy urgent personal needs: a new car, when the old woman has left us on foot; or face sudden medical expenses; or wanting to give an adequate gift to a nephew, on the occasion of graduation or marriage; or simply wanting to give yourself a more than deserved vacation in the company of a lifetime partner. But how can a pensioner find these figures? Here is the sale of the fifth of the pension becomes a good ally in finding the resources necessary to meet these costs.

The sale of the fifth of the pension: what is it?

The sale of the fifth reserved for pensioners, is an opportunity that the legislator wanted to make available to a wider audience, compared to that previously granted only to active employees. Today, millions of pensioners, in fact, have the possibility of using them, obtaining a loan from a credit institution, which will then be automatically reimbursed by INPS through their pensions. This reimbursement cannot exceed 20% of the monthly pension amount: hence, the expression cession of the fifth.

How the pensioner must move

The pensioner intending to apply for the loan can contact a bank or a finance company that deals with the sale of the fifth to the pensioners, and agree on amounts and conditions, upon request to the Social Security Institute of the communication of transferability of the pension. This certificate is crucial to establish the maximum monthly amount that the applicant can reimburse, and, based on that, to establish the number of installments necessary for the extinction of the debt. It will then be the INPS to retain the amount set by the pension.

As a rule, the restitution foresees a minimum of 24 installments and cannot exceed 120, that is 10 years, remaining within the 90 years of age of the applicant, even if exceptions are possible. Furthermore, insurance against the risk of premature death of the owner is mandatory in the amount.

Who is entitled and who is not

Since, by law, the minimum pension cannot be affected, all those pensioners who exceed this quota will be entitled, net of social security and tax deductions.

They are excluded, then:

    • those who benefit from pensions and social allowances
    • those who have been assigned civil disabilities
    • those who receive monthly allowances for assistance to pensioners due to disability; for income support; or allowances to the family unit
    • those who are in possession of co-pensions from a party who is not entitled to the assignment
    • those who make use of the evacuation benefits, referring to the Law n. 92 of 2012

Installment calculation

Installment calculation

Since the pensioner can repay a maximum of 20% of his pension, the amount of the monthly fee will be strictly related to the amount of the pension itself. For example, those who receive a gross pension of 1,200 euros, less 300 euros of tax withholdings, will get a net pension of 900 euros. The transferable fee will then be 180 euros, equal to one fifth of the net pension.

On the other hand, if you have a pension slightly above the minimum, you will only be able to repay the excess over the minimum amount, which will have to be calculated, on a case by case basis, with the financial institution to which you have turned.

The controls of the Social Security Institute

To protect the pensioner, INPS reserves the right to check certain inalienable characteristics by the bank or financial company to which the applicant has turned. These conditions are:

    • that the bank or financial institution consulted have all the requisites required by law for this type of transaction
    • that the rate applied to the loan is lower than the so-called anti-usury threshold rate for the accredited financial institutions, or at the rate conventionally established for its age group for the loan disbursed by a conventioned financial institution
    • that the contractually agreed installment does not exceed the famous fifth of the pension amount
    • that all the expenses concerning the preliminary investigation, the eventual early repayment, the insurance premium due for premiere, all the commissions and the interests in their entirety have been expressly indicated in the contract.