Sections

Italy: Mefop chief says optimism “difficult”

ITALY - The president of Italian pension fund association Mefop, Marcello Messori, says it is “difficult” to be optimistic about the current pension situation.

Professor Messori said in an interview that, although some progress had been made since the government embarked on pension reform 18 months ago, a much needed “quality leap” could only be achieved with more clarity in regulation.

”The government should have hurried up for a long time now,” Messori said. Mefop was set up to promote Italian pension funds.

One of the most significant challenges for the reformers, he said, would be the achievement of an “efficient” first and second pillar system.

Once the reforms are in place, Messori said, workers would no longer receive up to 80% of their wages, but following the 1995 Dini reform, later reviewed by Prodi, only between 30% and 75% making the need of a strong second pillar crucial.

The reform would affect workers in different ways: workers who often changed jobs, especially the younger workers, would be hit hardest unless the second pillar were “reinforced”, Messori explained.

Employees who, by January 1996, had been working for 18 years, would be “partially included” in the reform, while workers with longer careers would not.

“These three different typologies must be simplified,” Messori said. A “pro-rata” system that would include all workers from a set date, could be an alternative, he added.

“In macroeconomic terms, with the pro-rata the allocation time of the Dini reform would be reduced.”

There was also an “imbalance” between contribution rates between employed and self-employed workers.

An employed worker currently pays 33% of his wages into the first pillar pension, while his self-employed counterpart 19% - the difference could potentially make some self-employed workers poorer than their employed counterparts, Messori said.

But he added that a reduction of contribution tax rates “must not be thought of before the second pillar is reinforced”.

Speaking of the government’s bill to combine the pension and market regulators Covip and Consob – and their insurance counterparts ISAP - into a single authority he said:

”The idea would be to achieve a division of aims: stability to Banca d’Italia, competition to the anti-trust authority and transparency to the new authority but it is difficult to draw a neat line between transparency and stability because they tend to overlap.”

“I am all for a purpose-based division of regulatory powers, but when it comes to pension funds I think they are also social security actors and that’s why I think in the specific case of pension funds there should be an ad-hoc authority.”

The trattamento di fine rapporto, or TFR, an indemnity given to the workers at the end of employment, was described as an important ingredient for the development of the second pillar market.

But Messori said he found the idea of making the investment in TFR compulsory “unacceptable”.

A good compromise to the problem of making the second pillar strong without putting TFR, defined contribution arrangements, in danger would be what Mefop put forward - the commonly known as “silent consent”.

‘Silenzio assenso’ would allow the investment of TFR unless the holder explicitly forbade it and has so far proved a controversial issue.

More independence must be sought to grant a higher degree of transparency and safety for pensions in the field of corporate governance of open pension funds, Messori continued.

“There is no distinction between a company that has set up the funds and those who are responsible for the pension funds - a conflict of interest.”

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2498

    Asset class: Fixed Income Investment Grade.
    Asset region: Global Developed Markets.
    Size: $50m.
    Closing date: 2019-01-07.

  • DS-2499

    Closing date: 2019-01-02.

Begin Your Search Here