University years’ redemption: is it advantageous?

Abstract

Redeeming university years to increase contributory seniority and pension entitlements is a valuable instrument that enhances workers’ flexibility in shaping retirement decisions. In Italy, this option exists. Graduate workers can redeem university years in order to better control retirement outcomes. Such instrument increases both contributory seniority and the accumulated contributory amount, allowing workers either to anticipate retirement or to retire with higher pension benefits. Choosing whether to redeem university years represents a fundamental decision, with potentially significant implications for the retirement outcomes of millions of workers. Given its relevance, a crucial question arises: is the redemption option convenient? And under which conditions? This question is particularly important in the context of the Italian pension system, which is expected to provide only partial income replacement, thereby increasing the importance of supplementary saving mechanisms. To the best of our knowledge, there is no study that rigorously addresses this issue. In this paper, we fill in this gap by proposing a novel and comprehensive framework to evaluate the redemption decision. Our approach provides a structured and consistent methodology to assess whether redeeming university years yields tangible benefits for Italian graduates, offering insights that improve current understanding and provide solid foundations for future research.