The directors of Italy's industry wide and regional pension funds already are trying to figure out how to keep their members once employees become free to choose their private pension plans.
Five years after a pension fund begins collecting contributions, its members have the right, in theory, to opt instead for a fund run by a bank or insurance company.
For Fondenergia, the 160 billion lire ($79 million) industry wide pension fund for Italy's energy workers, the clock began ticking in July 1998.
"The asset managers we appointed . . . only started work at the beginning of February of this year," said Elio Giannetti, vice president of the pension fund.
To entice participants to stay, the Rome-based fund hopes to add two investment options to its current offering of a portfolio of 67% bonds, 33% stocks within the next year. The new options would be a more conservative bond-oriented offering and a more aggressive stock-focused option.
"We hope they stick with us, because our fund was created to cater to them," Mr. Giannetti said.
There are built-in enticements to keep people in the industry wide funds, said Claudio Pinna, managing partner of Adelaide Consulting, Rome.
Employees who opt for open pension funds will not be able to count portions of their expected end-of-service bonuses as part of their pension accounts, he said.
"That just means they get the full amount of their end-of-service when they retire or leave, whichever is the earlier," he said.
"The worst is that they cannot benefit from the employer's matched funding. That money is lost forever."
Raffaele Bruni, a partner in the Milan-based Bruni, Marino e Co. Srl consultancy said he expects open pension funds to become "more aggressive as the date approaches."
Fondodentisti is among the industry wide funds that have approached the challenge by offering members several investment options. "We decided we wanted to offer a multicompartment option straight away," said Luigi Daleffe, president of the 30 billion lire fund, which has 3,000 members from a total of 45,000 dentists in Italy. "We asked members to specify which profile they preferred when they applied."
About 50% preferred a stock-based option, 30% wanted a balanced portfolio, while 20% were happy with a bond-only option.
Fonchim, the 550 billion lire pension fund for Italy's chemical industry workers and the first of the industry wide funds to have taken off, is considering switching from one to two or three investment options.
Andrea Girardelli, a member of the board of directors, said the fund's members were not clamoring for the change, "but we need to be ready to offer them this option." The fund has 97,000 members with some 2,000 a month signing up.
"Most of the new members are people who took a wait-and-see approach and have now been convinced to sign up," he said.
Solidariet Veneto, a 10 billion lire regional private pension fund based in Venice, will offer its 10,000 members three options, said Franco Deotti, fund administrator.
Asset mixes
The "prudent" portfolio will be a 90% bonds, 10% stocks and be managed together by Compagnia Assicuratrice Unipol SpA, Bologna, and Unionvita, Rome. The "income" option will be managed by Arca SGR, Milan, and include between 10% and 30% stocks. The "dynamic" portfolio will be between 30% and 60% stocks and be managed by INVESCO Italy, Milan, he said.
The 10,000 members, who hail from 500 companies in the Venice region, will be asked to choose which profile they prefer near the end of the year. "We will be conducting an information campaign as well," Mr. Deotti said, "to help them understand what is on offer."
Solidariet Veneto recently appointed Milan-based Banco Ambrosiano Veneto SpA as its depository bank and Previnet as its administrator.
With membership standing at 1,200 and with plans for sending out requests for proposals by the end of June, Fonligure, the fund for the Liguria region's artisans and small businesses, also plans to offer multiple options right away.
"There will be three profiles," said Luca Costi, a member of the board of directors. This was done to better service the members' needs rather than as a "sweetener," he said.
Indeed, Mr. Costi said, the way he interprets the legislation, the five-year rule applies only to funds for employees. "Our people are all self-employed," he said.
The five-year rule has other implications for the fund. "More than fearing our members might migrate to an open-ended fund, we are concerned that people promoted from the shop floor to the supervisory capo or quadro grade, and who were members of the Cometa fund in their old jobs, cannot sign up to our fund until their five years with Cometa are up," said Lorenzo Barolo, vice president of the 45 billion lire FIAT Capi e Quadri fund for Turin-based fund for carmaker FIAT's supervisory workers, who do not technically qualify as managers.
Lack of information
One of the problems the fledgling industry wide pension funds have to address is that they know little about their members.
"With no idea as to the age profiles of the members or their risk-averseness or otherwise, we cannot really approach the issue of offering different options beforehand," said Bruno Feligini, a member of the preliminary board of directors of Alifond, the private pension fund for Italy's 200,000 food workers.
The Rome-based fund recently reached 27,000 members and has just appointed its board of directors. It hopes to nominate administrators and a depository bank by July.
Fondenergia was among the funds for which MEFOP, the recently established Milan-based research consultancy for private pension funds, conducted a survey into members' views on the sorts of funds they would prefer.
"The majority of the interviewees opted for the more conservative options," said Mr. Giannetti.
