ITALY - Italian pension funds failing to create a default option that replicates returns posted by final indemnity funds, whilst offering capital and minimum yield guarantees, may be forced to resort to insurance vehicles.
Between January and June next year, Italian workers will be asked to transfer their final indemnity payments (Trattamento Fine Rapporto, or TFR) into an existing investment option with a pension fund.
TFR funds were historically held by employers on behalf of workers.
Under the new system, employees who fail to decide will see their TFR transferred into a specific investment option that should not only replicate the TFR fund returns, but also offer the capital and minimum yield guarantee.
Funds are reportedly struggling to cope, as this option would be a form of insurance.
“We have no choice but to create this investment option for the ‘silenti’, or ‘silent ones’, however it is very difficult,” said Gerhard Untekircher, deputy director of Laborfonds – the pension fund for workers in the Trentino Alto Adige region.
Andrea Canavesio, partner at Mangustarisk consultancy, said: “Unless an asset manager comes up with some sort of solution, the only option is for the funds to resort to insurance vehicles, because they would be the only ones capable of guaranteeing the capital return for each worker’s contribution.
“There is a lot of confusion between the pensions regulator, COVIP, and legislators as to what exactly this option should guarantee. Although initially it was announced it needed to replicate the TFR fund returns with a capital and minimum yield guarantee on top of that, discussions are still ongoing.”
Canavesio claimed this would be a simple task for corporate pension schemes. “Funds covering a whole industry sector will find it more difficult to reach out to the employees,” he said.
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