ITALY - The Italian reform law that was planned for this summer is now struggling to be ready by the end of the year, writes Robert Galbraith.
Pensions reform in Italy has become bogged down by political infighting among parties in the governing alliance, and a law – which was supposed to be ready by the summer – may take until the end of the year to complete. Or even longer.
Although vaguely defined, the main objectives were to raise the retirement age, cut contributions for new employees to state pensions and create incentives for people to join private schemes. There was also an intention to make the pensions market more competitive by putting closed occupational funds on an equal footing with open ones selling to the public.
One of the key objectives is to have workers put contributions towards severance pay, known as ‘trattamento fine rapporto’ or TFR, into the new occupational pension funds.
Currently, the TFR contributions amount to about 8% of an Italian worker's pay. Putting all annual TFR contributions into pension funds could increase the flow of assets by up to e14bn a year.
However, the government failed to include pensions reform in its economic and financial planning document which it published in July, fearing opposition from unions and partners in its coalition.
The biggest political obstacle has been the populist and separatist Northern League party which is opposing cuts to the state pension.
Unions are opposed to making transfer of TFR contributions compulsory and are resisting attempts to have occupational funds put on an equal footing with open schemes.
Pensions spending in Italy accounts for about 14% of GDP and is forecast to increase to 15.7% by 2030 without reforms. In an economic update on Italy, ratings agency Moody's highlighted the need for pensions reform if the country is to tackle its debt mountain which stands at 105% of GDP.
However, Moody’s also recognised the problems.
“On account of the continuing slowdown in the Italian economy and the current political climate it could be very difficult to take forward a reform which has been blocked in parliament for 18 months,” it said.
Roberto Maroni, the welfare minister who is responsible for drafting the pensions reforms, is confident that the law will be completed in the autumn.
“The objective is to improve the draft law with an amendment which will first be presented to the parties in the governing alliance and then the unions,” he said during a press conference at the beginning of August.
“Everything will be completed by the end of September or at the latest the middle of October so that the law can be approved by the end of the year.”
However, Maroni made clear that there will be no room for radical cuts or a freeze on early retirement.
“The objective is not to raise cash but to create a fair social system which is financially sustainable,” he added.
Previous forecasts about when pensions reform would be introduced have proved wildly ambitious and it seems that, if the deadline is to be met this time, only an extremely bland set of measures will be approved.
Richard Wohanka is to chair The Pension Superfund's trustee board, working alongside professional firm 2020 Trustees to safeguard members' benefits.
Four people behind a £13.7m cold-calling scam which cost 245 people their savings have been banned from being pension scheme trustees by The Pensions Regulator (TPR).
The Pensions Administration Standards Association (PASA) has launched its latest round of guidance for guaranteed minimum pensions (GMPs).