Anatomy of satisfaction

Fonchim, the €4.5bn industrywide pension fund for Italy’s chemical and pharmaceutical industry workers, has been one of the most successful of the new complementary pension funds at recruiting members. The fund has attracted 116,000 members, 60% of its potential membership, since it was launched in 1999.
This is far higher than any of the other contractual funds, many of which have had difficulty in attracting members. Fonchim has continued to see an increase of participants in spite of difficulties the Italian complementary pension system has faced.
The Pension Forum at Bocconi University in Milan recently carried out a ‘satisfaction survey’ - the first and certainly largest of its kind to date - to find out why Fonchim has been so successful at recruiting and retaining members.
The aim of the survey was to find out from Fonchim members their motives for joining, to measure levels of satisfaction with the fund and to assess attitudes towards the multicompartment system, the three investment choices offered to pension fund members.

Unusually, the survey also canvassed the views of the non-joiners. The aim here was not only to find out why people had not joined Fonchim but also to hear about their perception of how satisfied their colleagues who are members of Fonchim are with the fund. In other words, the survey was designed to crosscheck levels of member satisfaction against the views of non-members.
Sergio Paci, Patrizio Contaldo, Gianfranco Forte, Giacomo Nocera and Francesco Vallacqua of Bocconi University set out the conclusions of the survey in the report ‘The satisfaction of members and institutional parties in relation to the Fonchim Fund’.
The broad conclusions of the report are that people’s understanding of the mandatory state pension is low, and that there is some confusion about the multicompartment system, but that that in general people are satisfied with the Fonchim fund and its performance.
The Pension Forum surveyed four groups – employees who are members of the Fonchim fund, employees who have not yet decided not to join the Fonchim fund, companies that distribute Fonchim products and representatives of the unions at every factory belonging companies involved with Fonchim.
Members of the fund were asked about their reasons for joining, their experience of communications with the fund, and their use of the internet site. They were also asked about their understanding of the multicompartment system, their awareness of where - in terms of assets classes - their money was invested their perception of the fund’s performance, and the extent to which they felt they belonged to the Fonchim fund. In other words , the surveyt wanted to know whether they felt Fonchim represented their interests.
The people who had not yet joined the fund were asked about their knowledge of the fund, their reasons for not joining, and whether they thought the Fonchim members were satisfied with the fund.
The companies involved in Fonchim were asked why they thought some people had joined the fund and others had not. They were also asked about the administrative burdens the fund placed on them and how they saw their role vis a vis Fonchim. For example, one question was: “Are we simply distributors or partners?”
The workplace unions were also asked why they thought some employees had joined and others had not, and how satisfied they thought employees who had joined the fund were.
The response rate was higher than the average for this kind of research, with responses from 30.7% of the of 14,521 Fonchim fund members, 16.5% of 12,641 non-members, 39.7% of 2,209 companies that belong to the Fonchim scheme and 27.1% of the 2,209 union representatives (on the basis of one representative per company). In total, Fonchim was able to return some 8,000 questionnaires to the university.

One important finding of the survey is that awareness of the public pension system is low. A large percentage of the Fonchim fund members, 47.8%, do not know exactly how much they will receive when
they retire. A significant percentage, 36.5%, have optimistic expectations, with 9.5% saying it will be “equal to the last wage” and 27% saying it will be “approximately three quarters of the last wage”. A smaller percentage, 15.8%, have more pessimistic expectations, with 12.6% looking forward to half of their last wage and 3.2% expecting a quarter.
So far as the Fonchim fund is concerned, a key finding is that people choose to join the fund because they trust the company they work in and also the unions they belong to.
Most people hear about the fund in the workplace. The largest percentage, 31.3%, say they gained their information about the fund at workplace assemblies, 25.4% from talking to colleagues, and 15.1% from their trade union. Only 5.2% say they get information about the fund from the press.
A large percentage of members, 85%, say they feel the fund is representative of them for a variety of reasons. Almost half, 49.8%, think Fonchim is relavant to them because it represents the industrial sector they work in, 25.7% say it is because other people in the same company are members. Only 14.6% say that Fonchim does not represent their interests.
The results of the survey show that there is still some way to go before people fully understand the multicompartment system, through which members can choose one of three types of fund - cash, growth and stability - according to their risk appetite.
A large proportion of Fonchim fund members, 69.8%, say they know which compartment they are enrolled in, 54.5% in the stability compartment, 11.8% in the cash department and 3.5% in the growth department.
A further 10% say they do not know the name of the compartment in which they are enrolled, but claim to know its main characteristics. And 20% admit they do not know which compartment they belong to.
Only a small proportion of members, 30.9%, who know which compartments they are enrolled are aware of the actual composition of the portfolio, in terms of asset allocation. Only 10.6% of the members who say they belong to the cash compartment know that the portfolio does not contain any shares.
Rather more, 34.9%, of members who say they belong to the stability compartment know that the equity weighting is 30%. A similar proportion of members, 36.3%, who say they belong to the growth compartment know that equities constitute 60% of the portfolio.
The survey also shows that Fonchim fund members are not fully aware of the fund’s low fees, and the impact that this has on costs. Only 25.9% think that the costs related to investment in Fonchim are lower than the costs that would be expected in other forms of saving, while 33.2% think that costs in Fonchim are at the same level.
An equal proportion, 34.6%, say they do not know enough to be able to express a opinion.
However, 80% of the members say they are satisfied with Fonchim. Both the companies and the unions endorse this perception. The most important endorsement comes from people who have not yet decided to join the Fonchim scheme but who say, for example: “my colleague is happy with Fonchim”.
Finally, the internet is considered a good communication tool. Most members, 77.7%, express varied levels of satisfaction with the internet as a way of keeping in touch with the fund.

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