New Italian pensions policy to give custodians more 'responsibility'

ITALY – The Italian pensions market will find itself at a turning point in the coming months as new regulation forces pension fund managers to reorganise their schemes, RBC Investors Services has warned.

In a recent survey of pension funds, asset managers and advisers in the country, RBC said changes in investment policy implemented in March 2012 by the pensions regulator – the Commissione Di Vigilanza Sui Fondi Pensione (COVIP) – could lead to widespread restructuring.

RBC said more than 80% of pension fund respondents indicated that they were resigned to at least a “partial” reorganisation of their schemes, while 17% said a “significant” one would be necessary.

The report went on to say that the restructurings would have a major impact on the custodian market, giving custodian banks a “substantially greater” responsibility for their role in the pensions system.

Mauro Dognini, managing director of investor services in Italy at RBC, said: “Pension funds need to enhance efficiency, transparency, risk management and corporate governance in this climate of rising retirement costs and economic uncertainty.

“It will fall to the custodian to support the pension funds with in-depth analysis of technical information in order to support the new regulations.”

The new regulatory changes enacted by COVIP will require pensions providers to be more forthcoming about their investment principles and the instruments through which they plan to invest.

Pension fund managers will also have to provide additional detail on expected returns, performance appraisals and control systems, assessment measures and procedures in place.

According to RBC, all of the pension funds surveyed said the new COVIP provisions would have a positive impact on governance models, despite the need to restructure their funds.

However, nearly three-quarters of respondents said additional administrative costs associated with the reforms could exceed €100,000.

Pension funds with 1,000 or more members as were required to comply with the new regulation in December 2011, while smaller pension funds have until the end of 2013.