In this paper, we highlight the importance of strengthening the role of the second pillar in an overall balanced social security system. In particular, in countries like Italy, characterized by a considerable Pay-As-You-Go first pillar and a high demographic dependency ratio, private pension funds play a key role since they could provide a crucial supplement to benefits from the mandatory pensions. Given the declining role of public pension coverage, the assessment of function played by the

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... nd pillar is a key issue to assess whether a pension system is sustainable. Using Italian data, namely the Bank of Italy SHIW, we estimate the adequate net replacement rate needed to maintain one's standard of living in old age and in particular the level of pension coverage that should be guaranteed by private pension arrangements. Estimates are provided according to the fixed effect and the fixed effect ordered logit empirical models and display an adequate net replacement rate ranging from 85.60% to 86.02% depending if we use the former or the latter. Specifically, households' wealth appears to be a key variable in supporting the standard of living in old age since the adequate replacement rate reduces as wealth increases.