ITALY - One of the key aspects of Italy’s pension reform, the development of the second pillar through the investment of severance payments into pension funds, has been postponed amid a lack of clarity on regulation and management.

The delay – from July to September - has been announced following a meeting between welfare minister Roberto Maroni and employers and unions yesterday. It means that workers have until March 2006 to decide what to do with their severance pay, or Tfr. It’s a business estimated at €7bn.

There seems to be friction between the government and the social partners about how to act when whether workers make, or fail to make, their own decisions about the Tfr.

A spokesman for trade union Cisl told IPE that the infrastructure was not yet adequate.

“We are not happy with these delays, but workers must be properly informed before deciding about their Tfr and that means that things must be properly set,” he said.

The pension reform was passed last July. One of the elements was that the Tfr end-of-career payment should be invested in pension funds rather than being paid as a lump-sum - unless the worker specifically forbids it.

The Cisl spokesman said workers in theory could have access to pension funds managed by banks, known as open funds, or closed ones organised by employers and unions. He said they “give a higher degree of protection to workers”.

But he said that the actual number of closed funds was still scarce in the public sector and it that would take time to organise a strong network.

Employers are anxious to settle compensation for the loss of the Tfr cash, which has been used for self-financing and business development.

Social partners and the ministry also differ on what to do in case the workers do not say how they want the Tfr invested.

There is also dispute over which agency should oversee the management of pension funds. The reform gave the role to pension regulator Covip.

But a recent bill to protect savings, prompted by the Parmalat scandal, gives market regulator Consob jurisdiction over insurance policies, which are one of the pension saving options.

The welfare ministry says there was an “agreement” with the government to reinstate Covip as regulator over pension funds and insurance policies.

“I am certain that Covip will be once again controller, otherwise insurance companies will not be allowed to have access to the €7bn Tfr business,” Maroni was quoted as saying.