The Italian pension regulator, COVIP, has called for fine adjustments to the complementary pension system to attract potential new members, widening pension payout choices, and pushing for sub-funds for equity investments as default options.
It is crucial to include women, young people and workers in Italy’s southern regions, often with unstable employment conditions, in the complementary pension system, COVIP’s acting president Francesca Balzani said last week, introducing the regulator’s annual report.
Tax breaks on contributions could become a form of “entrance contribution”, at least in the first phase of membership in a pension fund, to nudge employees to join a scheme, she added.
Women still represent only 38.3% of the total number of members signing up for a complementary form of pension, a share that has remained unchanged compared to five years ago. “There is a lot of work to do here”, Balzani said.
Women also contributed 16% less than men to saving for old age, with the gap increasing with the age, she added.
Only 19.3% of members are young people below 35 years old, with the share of people under 20 years of age seeing an uptick to 2.7% in 2023, according to COVIP. The share of self-employed joining a pension scheme is 23.5%, compared with 37.6% of employed people, it added.
The complementary pension system has remained robust in the last few years despite the most recent financial crisis, with memberships and contributions growing, and positive returns, particularly for sub-funds investing in equities.
The number of members increased by 3.7% year-on-year in 2023 to 9.6 million, COVIP noted.
Membership in pension funds for employees in the public sector grew thanks to the ‘silent consent’ mechanism (meccanismo del silenzio assenso) introduced in 2019, Balzani said.
However, COVIP said this is “not optimal” under the silent consent rules, because ‘Garantito’ sub-funds – which typically have a higher allocation to fixed income – are set up as a default option for the transfer of severance payments (Trattamento di Fine Rapporto, TFR).
In the last 10 years, equity sub-funds recorded 4-4.5% returns on average, whereas ‘Garantito’ sub-funds did not achieve returns on par with the revaluation of the TFR of 2.4% on average per year, she added.
The obligation to receive at least 50% of accrued savings as annuity won’t encourage saving for complimentary pensions, she continued, suggesting to widen pension payouts’ choices, for example spreading payments over a multi-year period, keeping a share of the assets in the pension fund for investments.
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