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Italian pension funds see slower asset growth in 2013

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The growth rate of total assets of Italian pension funds slowed last year, according to figures released by Italy’s pension fund regulator Covip (Commissione Vigilanza sui Fondi Pensione). 

Assets of Italian funds grew by 11.6% to €116.4bn during 2013, compared with 15.1% the previous year, Covip said at its annual conference on 28May in Rome.

The sector’s total assets (excluding Casse di Previdenza, first-pillar private schemes) topped €116.4bn last year, growting from €104bn in 2012.

The figure represents 7.5% of the country’s GDP, considerably lower compared with other European countries, Covip admitted.

Covip’s data suggests the slowdown was due to suspended contributions and exits from funds.

In 2013, total membership of complementary pension funds grew faster than the year before – Italian schemes added 6.1% in assets during 2013, compared with a growth rate of 5.3% in 2012. 

However, Italian workers who have stopped contributing money into their pension pot were 1.4m in 2013.

The figure corresponds with a staggering 22% of the total 6.3m Italians who are enrolled in second-pillar pension schemes. 

These workers, dubbed “silent members” by the regulator, have halted their contribution due to the troubled labour market, Covip said.

The regulator pointed out that more than 1m of these workers are members of open pension funds or holders of individual pension plans (PIPs).

Industry pension funds (fondi negoziali) and pre-reform funds (fondi pre-esistenti) only had 200,000 and 100,000 members, respectively, who had stopped contributing in 2013.

The figures seem to suggest industry pension funds and pre-reform funds were better at retaining their members’ contributions flowing in.

However, the figures show these funds had more people leaving altogether compared with the other categories – 109,000 members, or 4% of the total, left these schemes in 2013.

Comparatively, open pension funds and PIPs lost 2% of members over the same period.

The latter category fared better in terms of new entrants as well, with 458,000 new subscriptions compared with 83,000 new members at industry funds and pre-reform funds.         

In 2013, industry pension funds returned 5.4%, compared with 8.2% in 2012.

Open pension funds returned 8.1%, also lower than 2012, when they returned 9.1%.

Unit-linked PIPs returned 12.2% while other PIPs returned 3.6% in 2012.

Over the same period, the TFR (Trattamento di Fine Rapporto) grew by 1.7%.

The TFR is the severance payment Italian workers receive on termination of their employment.

It is financed by the worker and the employer and can be directed to a second-pillar pension fund upon the workers’ choice.

As such, the TFR growth rate is usually compared with pension funds’ returns to gauge their attractiveness.

Covip noted that, since 2000 – when the Italian second-pillar sector took off – second-pillar funds have grown by 48.7% while the TFR, which is linked to inflation, has grown by 46.1%.

In terms of asset allocation, the Covip figures confirmed the widespread tendency of Italian pension schemes to invest in traditional asset classes.

Of a total of €86.8bn invested independently by Italian pension funds, 61% is invested in fixed income, largely government debt, 16% in equities and 13% in collective investment funds and SICAVs.

Only €2.1bn is invested in Italian companies, €1.4bn of which is fixed income and €700m equity.

Chairman Rino Tarelli expressed Covip’s concern that too little of the sectors’ assets was invested in the Italian capital markets, and called for the pension industry to get more involved in the local economy.

Speaking at Covip’s event, labour minister Giuliano Poletti echoed Tarelli’s invitation to pension funds to invest in Italian companies and projects.

However, Poletti’s speech could suggest the second-pillar pension sector will face some tough times.

The minister confirmed the government was still to make a decision on whether Covip should be scrapped or not, after Tarelli said he hoped Covip would keep its integrity and independence.

Poletti also hinted that tax rules for pension fund holders might change, and said the first and second-pillar systems should be harmonised with the aim of acting not only as providers of pensions but welfare in general.

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