ITALY - The latest statistics about Italy's pensions market show that private funds are steadily accumulating assets but slow membership growth rates for both contractual and open schemes suggest that further reforms are necessary to stimulate the market.
Workers looking to join a pension fund must sign up to a contractual one if it exists in their company or their industry and remain there for at least five years. The government has resisted calls to cut the state pension in order to force workers to start complementary provisions, insisting that incentives are enough.
The half yearly report from the Italian pensions regulator, Covip, published at the beginning of September, reported that only 12% of workers who could join a pension fund set up within particular industries have done so while 57% of people qualifying to join a company scheme have joined.
At the end of June, the 37 contractual funds had 1,022,682 members, compared to 36 funds and 1,021,186 members at the end of December 2002. The 93 open pension funds which sell products directly to the public had 350,281 clients at the end of June, 12% more than in December last year. Contractual funds had a total of e3.9bn of assets at the end of June, 41% more than a year earlier, while open pension funds had e1.4bn, 38.7% higher than in June 2002.
Covip's report on the performance of the funds appears to give encouragement to those looking to introduce pensions reforms. One of the proposals is to have workers put severance payment contributions known as ‘trattamento fine rapporto’ (TFR) into the private pension funds.
The value of TFR increases by an obligatory amount each year through a complex calculation which takes into account, among other things, the inflation rate and average earnings rises.
The lump sum paid out at on retirement or when a worker leaves a company is considered to be a surrogate pension. Consequently, pensions investments tend to be judged against the increasing vale of TFR. For the first time since the private pension funds were launched they have managed to outperform TFR.
In the first six months of the year the value of contractual fund assets rose by an average 2.3% compared to a 1.7% increase in the value of TFR. The pension schemes selling to the public also beat TFR, registering an average 2% increase.
A separate report from the Italian fund management association, Assogesitioni, showed that insurance companies are the most active on the open market. At the end of June they had 158 investment products compared to 92 for fund management companies, 40 for brokerage and securities houses and 11 for banks.
However, it is the fund managers that have the majority of pension assets. These companies had e512m, or 35.9%, of the total compared with e393m (27.5%) for the securities houses, e349m for insurance companies and e173m for banks.
A joint venture between Italy's largest bank, Banca Intesa, and the biggest insurance company, Assicurazioni Generali, has the most pension assets under management on the open market with e393.3m.
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