ITALY - Covip, the Italian pension funds regulator, has asked Italian pension funds to provide workers with periodic estimates of their individual position and expected investment returns of their private pension schemes.

The move shows Covip is bidding for a more transparent and dynamic pension sector and the regulator aims to spread more awareness among Italian workers by showing the investment potential of 'complementary' pension schemes provided by 'opened' pension funds and run by managers with more active strategies, as opposed to 'closed' ones, which are restricted to workers in single sectors.

As part of the project, whoever joins a pension scheme will receive a standardised estimate of the value of his 'complementary' pension scheme, based on information gathered by Covip on different types of workers according to age and level of contribution. Covip said the estimate 'will guide workers in making decisions when joining a fund.'

Thereafter, every pension fund member will receive a periodic individual forecast of their position which will take into account their own pension plans, their personal characteristics and the fees the scheme charges. This estimate will also take into account the expected returns forecast by managers in relation to the asset allocation profile of the chosen type of investment.

The first submission of individual estimates will be included in the funds' 2008 annual update.

Covip has also asked funds to insert applications in their websites to allow workers to calculate the expected level of a complementary scheme, to help workers evaluate the impact of alternative choices, such as, for instance, requests of advances or shifting of cash between funds within the scheme, as well as picture the risk profile of the investment compared to basic pensions.

"These issues need a more focused consideration, especially  by authorities. There is a need to provide accurate and coherent forecasts of pension provision particularly highlighting the different returns achieved by basic pension and complementary pension investment," said the regulatory body in an announcement.

Covip has published a detailed set instructions for funds to refer to.

But this announcement of the project comes just days after the regulator posted positive 2007 growth figures for the 'complementary', or private, pension sector. The number of workers with private, as opposed to state-funded, pension plans grew from 3.2 million at the end of 2006 to 4.6 million at the end of 2007 - a 42% increase.

The number of private sector workers, who benefited from the much-discussed TFR reform on severance payments, subscribing to private pension schemes reached around 70% of all entitled workers.

Covip also issued a paper last month clarifying how existing pension funds should adapt to the new legislation which led to the TFR reform. Italian pension funds have reviewed their internal charters but Covip asked for further rationalisation, for instance specifying the duration of managers' and internal controllers' mandates.

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