ITALY - Only a small number of Italians have chosen to put their severance pay TFR into pension funds but the pension industry will grow, asset manager Francis Candylaftis is convinced.
"Overall, it is a disappointing result at this stage," Candylaftis commented following first estimates of people choosing to use their Trattamento di fine rapporto (TFR) for retirement provision.
Candylaftis, who is the designated new chief executive for Eurizon Capital, said various factors were responsible for people not putting enough money into pension savings.
"There is very little incentive to encourage their workers to put TFR into pension funds, particularly for small companies which are the back-bone of Italian business, because in doing so they would lose a good source of finance," Candylaftis said.
Furthermore, the information campaign on the options for the use of the TFR may have come too late. The Italian government decided only late last year to move the deadline for changes in the law forward to June 30, 2007.
Workers of companies with more than 50 employees have to decide whether to put their severance pay in a pension fund or to put it in a special fund created by the government. If they make no decision the money will automatically go into a pension fund. Workers in small companies can voluntarily opt to use the money for retirement provision but they do not have to make a decision.
First estimates on the use of the TFR suggest the majority of people chose not to put it into a pension fund.
"But, over time, people will realise that they have to save more for retirement," Candylaftis added.
He said he was confident the government will take measures in the future should the contribution rate to pension funds remain disappointing.
"I am sure the business will develop and pensions are very important," he noted.
He also confirmed developing asset management for TFR will be one of the things he wants to look at in his new position at Eurizon Capital.
But this will only be a small part of his work which is, as he points out, "to relaunch the asset management operations" belonging to the Intesa SanPaolo group.
After the repurchase of Nextra asset management from Crédit Agricole Asset Management SGR (CAAM) Candylaftis will have to integrate this business and "make it a large player in Italy" as well as "put it at a level where it will be able to compete with large European players".
Elsewhere, CAAM Sgr has named Michel Pelosoff as successor for Candylaftis as chief executive. Pelosoff will continue as CEO of CAAM's real estate arm at the same time.