Over 800 hundred pension funds, created by Italian banks, insurance companies and mutual funds are awaiting the final decree in a series issued by the Italian government since the start of the year which will officially set up private pension provision.
This decree, which is considered the most important is expected to be signed by the Minister of Labour Tiziano Treu in the next two weeks. It authorises, inter alia, the setting of pension funds, selection of boards of directors and maintenance of professional standards. Funds expected to apply for recognition will represent large corporations such as Fiat and the larger trade bodies such as the metalworkers association.
Since the start of February all other relevant legislation, mostly the responsibility of the Italian Treasury has come into force including the decree specifying investment limits and the rules governing the means by which mutual fund companies can manage pension funds.
A new commission for pensions, with Mario Bessone who previously headed a stock market watchdog as president, has been set up to authorise and supervise the new funds. However the commission has a small staff which could lead to delays. Pensions funds business manager, Stefano Grassi estimated that it will take between 120 and 150 days to carry out the required procedures once the legislation is finalised with the first pension fund recognised between June and September this year.
Grassi, whose company Prime, a leading Italian asset management firm is applying to set up a fund, explained: They will have to watch around 2000 pension funds, all the rules, all the assets under management, directors, investment limits.”
The amount of assets under management will increase only very gradually. The market, as is the case in France, is expected to be small initially due to an already developed unofficial tier of savings for retirement coupled to the relatively small tax concession offered by the government although analysts believe that this may change at a later date. The fiscal incentive is currently limited to a maximum of 6% of annual income of the fund.
“At the moment with the budget troubles of the government they haven’t provided a very high fiscal incentive,” said Grassi.
“But they are currently reviewing public pensions and the feeling is that they will have to reduce them. It is likely that they will be forced to increase fiscal incentives and of course the forecast will change as a result,” he added.”