ITALY - Under the new law on the severance pay (TFR) an estimated €5bn is to flow into private pension funds.

Two funds have already put out tenders: Fonchim and FondoPegaso.

The €118m FondoPegaso running the pension scheme for employees of the gas and electricity industries in Italy said it was looking for two managers to invest a yet unknown amount of money from the first of July. Spokeswoman Rina Fabianelli told IPE that estimates are around €50m.

The €4.5bn Fonchim fund, the industry-wide scheme for Italy's chemical and pharmaceutical industry workers, put out a similar tender. Nobody could be reached for comment.

Under the new regulations severance payments (TFR) made by companies with over 50 employees will be transferred into pension funds, unless employees specifically choose for their money not to go into the second pillar.

In that case the TFR funds will go into the INPS social security state fund. TFR funds accrued until 2007 will remain with the companies.

The Italian government estimates that approximately one third of the €19bn expected yearly in TFR payments TFR will be transferred into private pension funds, one third into the state pension fund (INPS) and one third will staying with companies with under 50 employees.