ITALY- The intended Italian pension reform is a “revolution” converting the pension market away from ‘communism’ to ‘liberalism’ says Hewitt Associates’ Italian market manager.
Guido Blasco welcomed the senate’s vote of confidence of last week which passed the pension reform bill and referred it to the lower chamber for discussion.
Blasco told IPE he thought there was a 95% chance of the chamber passing the law, excepting exceptional circumstances. He thought the reform would be approved even if the government were defeated at the forthcoming European elections.
The political development would send a sign to rating agencies such as Standard and Poor's, which could have lowered the country’s credit ratings, Blasco explained.
“We are a country with a 106% public debt, add to that that we want to be virtuous and do everything not to break the three percent deficit limit. If a rating agency lowered our ratings the value of our bonds could go up one or two points,” he said.
Italy’s new second-pillar is financed by workers investing their end-of-career indemnity - TFR, or trattamento di fine rapporto - in pension funds. This business is worth about 12.5 billion euros a year.
The amended pension bill envisages the launch of common rules and controls over open and closed pension funds and insurance policies. This is a factor which Blasco hopes will bring more transparency and more choice for workers and employers.
Workers would have six months to decide about whether to invest the TFR in pension provisions or keep it. No communication from workers would be interpreted as consent to invest.
This so-called “silenzio assesnso”, or silent assent, is the only case of inertia selling allowed in the country, Blasco pointed out.
“Clever employers” should do their best to assist their employees and secure the recruitment of the best workers by showing information about the available options.
Blasco, however, said he had doubts about the idea of allowing the national institute for social provisions, Inps, to set up its own pension fund. If the institute set up its own pension scheme, it would provide “short term help” to the state deficit, Blasco said.
“We must not forget that it Inps would have a mandate to manage money and would get a fee for that service, but the money must be eventually be returned.”
Among other aspects of the intended reform, feature the 32% tax-free bonus for workers who decide to work after reaching pension age.
Result sharing plans, a “collective bonus” paid to employees of big companies, so far tax free up to three percent will be taxed at four percent.