One in five chose pension fund for TFR

ITALY - Eight out of 10 Italian workers have explicitly made a choice on where to put their severance pay (trattamente di fine rapporto, TFR) while only 10-15% used the 'silent assent' clause, figures released by the labour ministry reveal.

All employees are required by a new law to stipulate where they want severance page to be invested should they be made redundant but by the end of June, just 21.7% of workers had decided they want their TFR money to be placed in their pension funds.

At least 64% explicitly stated they did not want the money received at the end of an employment to go into a pension fund so their money will stay with the company if it has less than 50 employees or go into a social security fund set up by the government.

An estimated 10-15% did not make a choice which means their money will also go into pension funds, the ministry of labour said in a statement. Final confirmation of the 'silent assent' figures will be available in September.

In total, 34-35% of those required to make a choice on the destination of their TFR money have opted to use this money for their retirement provision. Some had already put the severance pay into pension funds before the law came into force.

"This is in line with our projections for a 40% share by the end of the year," labour minister Cesare Damiano said. From now on, new employees have to decide straight away where to place their TFR money.

Damiano added he was "quite satisfied" with the result. If the government's estimates are correct an additional €7bn per year could flow into Italy's pension providers.

Apprximately 23% of Italian workers have currently signed up with an occupational pension fund, bringing the total membership to just over two million at the end of June from 1.6 million the year before.

A further 200,000 people save money in 'so-called' open pension funds to which no employer contributes - the figure is up from 83,500 at the same time last year. 155,000 contracts have so far been signed for a tax-advantaged individual pension plan PIP.