The total amount of the so-called TFR payments that will be invested in Italian pension funds following this summer’s reform could reach E13.5bn a year, according to Hewitt Associates.
But it also says that the reform could mean higher costs for employers.
Under the reform, future allocations for employees’ termination indemnities, the so-called Trattamento di Fine Rapporto (TFR), are to be invested in a pension fund – unless the employee explicitly requests otherwise.
“The total annual amount of future TFR allocations invested in pension funds is expected to range from E12.5bn to E13.5bn” Hewitt says, commenting on the pension reform that was approved at the end of July.
The firm says the nature of the TFR will change – it will not be paid as a lump sum but as part of a pension fund it will be paid out “primarily as an annuity at the same time the employee retires”.
And staff who stop working early will not be able to use the TFR as a “bridge” pension any longer, the consultant says
The consultant adds: “Employees should be aware that this provision, as well as the provision allowing employers and employees to select pension funds, may entail greater administrative costs for employers.”