ITALY – The Italian cabinet has approved the final draft for the law that will change the Italian pension system, shifting some of the pension burden from the state to employers and employees.

The draft was presented to the cabinet last Friday by welfare minister Roberto Maroni.

It is now to be examined by parliament and the social partners, but the welfare ministry said in a statement that consultations should be concluded by the end of September.

The draft paves the way for the development of the second pillar, where billions of euros will transfer every year from workers’ pension pots, a severance payout known as Tfr.

Currently workers receive the Tfr in a lump sum at the end of their careers, and are mainly supported in their old age by the first pillar pension, which is set to plummet 19 percentage points in the next 50 years.

According to the pension regulator Covip, the annual volume of Tfr could range between €8bn and €10bn, although an asset manager who declined to be named said the sum could be closer to €13bn.

The draft gives Covip the sole responsibility to define and monitor any sort of pension-oriented saving, both collective or individual.

Insurance deals as pension saving must also obtain Covip’s permission. Pension savings will be taxed 11%.

The draft also settles the possible ways Tfr can be invested after the six months grace given to workers from January 2006 to decide what to do with it.

In case the employee makes no decision, the Tfr money must be invested in a way approved by the employer and the trade unions, this option includes regional pension funds.

When no alternative is available, the money must be paid to INPS, the National Social Security Institute for the private sector, which would act as asset manager.

The employer, who will be supported with a public fund for the loss of the Tfr money, must clearly inform the employee on the available options.

The draft also says that in October the government will launch an information campaign.