Competition and freedom of choice between open and closed pension funds could be established in Italy with the election of Silvio Berlusconi’s right wing/centre coalition government, according to prominent Italian consultant Piero Marchettini at Adelaide Consulting in Milan.
The long-awaited transfer of the legally required contract termination indemnity payments, trattamento di fine rapporto (TFR), from book reserves to pension funds was also one of the commitments of Berlusconi’s Forza Italia party during the run-up to last Sunday’s election.
At the moment Italian employees and companies cannot join open pension funds if they are covered by an existing industry-wide closed fund, or are able to set up a corporate fund. Marchettini notes that at present it is difficult to establish a company fund because of complicated Italian regulations, which is why only a handful of the country’s largest firms have done so.
“I believe that all pension experts, regardless of their political views, have always said that the critical factors in the development of pension funds have been true competition and the freedom of choice. The first measure would be freedom of choice, which would mean competition for the providers,” says Marchettini.
Past Italian governments have been careful of clashing with unions on pension issues. Sector-wide funds’ boards have employers’ association representation of 50% and labour union representation of 50%.
“In the closed funds the unions get the lion’s share, and Salvi former labour_minister has always had very close links to the unions, especially the leftist union, CGIL, which has always been strongly against the open funds, but this is not the case with the other major union, CISL,” says Marchettini.
Transfer of the TFR monies has been an objective of the last several Italian governments but they have all failed to introduce it.
“The past governments, mainly D’Alema’s and Amato’s governments, with Salvi as a labour minister, have always been against the move,” says Marchettini
“Everybody hopes that the money transferred to the pension fund is being invested rather than being a book reserve. The return of the investment will be higher than the guaranteed return, which is 75% of inflation plus 1.5%,” he adds.
Berlusconi also promised in his campaign to increase the monthly minimum social security pension to ITL1m (e516). Currently, it is a few hundred thousand lire per month, says Marchettini.