MILAN - Administrators and managers of Italy's private pension funds are on their own, after the government's long-promised proposals to help the flagging industry resulted in little more than bitter squabbling and calls for a general strike by the more militant labor unions.
"People have believed in this initiative (of private pension funds) and have worked very hard since 1996 to get it off the ground," said Claudio Pinna, a consultant with the Rome-based Adelaide Consulting. "The risk is that more time is lost and more workers miss the chance to invest for their future."
When elected last May, the government under Premier Silvio Berlusconi made much of the fact that second-pillar pension provisions had to be encouraged. Unfortunately, its reform proposals were part of a package that contained a number of unrelated measures, one of which resulted in the threats by labor unions of a general strike next month.
As a consequence, the rest of the reform package has been overlooked, and there are no indication when negotiations on the reforms might resume.
Key to the reforms is a provision that would pay employees' end-of-service bonuses directly into the pension fund. Amounting to one month's salary for every year worked, the trattamento di fine rapporto - or TFR -always was seen as a nest egg, but not as a pension, according to Mr. Pinna. "It's for buying a home for your kids who are getting married, refurbishing the house, going on a trip."
The total TFR fund is worth between e10 billion and e15 billion, compared with the private pension scheme's e2.2 billion, said Erich Stock, head of Italian business development for State Street Global Advisors, London.
Teamed with tax breaks, the proposals could really kick-start the private pension system.
Among the government's other proposals are ideas to modify the state pension provision, including the offer of incentives for those who choose to postpone retirement. Pushing through any change, however, is not going to be easy, as the unions are adamant that promises made in the past be kept.
Despite the delay, established private pension funds are making progress. Last year, 128,000 Italian workers signed up for the industrywide funds, bringing the total enrolled to about 1 million. Cometa - the fund for the country's metal workers - made the biggest gains, adding 33,000 members, to bring its headcount to 368,000. Other winners were Eurofer, the fund for the state railway workers; Priamo, the fund for tram and bus drivers; and Byblos, the fund for paper industry workers.
And interest from asset managers remains high as well. Fabio Cappuccio, a spokesman for Previmoda - the Milan-based fund for Italy's 500,000 textile and apparel industry workers - said he was gratified by the response to the fund's invitation to tender for three asset manager positions: "We were delighted to receive over 20 applications. Of these, four were from managers who do not currently operate in Italy." The fund expects to announce the appointment of asset managers later this spring.
Another fund that is examining proposals from potential asset managers is Concreto, the fund for Italy's 10,000 workers in the concrete and cement industry. "We have had 15 applications for two positions," said Raffaela Di Ciccio, secretary to the Rome-based pension fund's board of directors. "These will be worth e4.6 million in 2002, rising to e11.3 million in 2003 and e17 million in 2004. The investment profile will be 25% stocks and 75% bonds." The fund recently appointed Monte Dei Paschi di Siena as its depository bank and Lavoro Servizi Previdenza as its administrator.
During the course of 2001, another three funds became fully operational in the sense that the managers' contracts were approved by the regulatory authority, bringing the total to eight. There are 41 industrywide funds, of which 27 were entitled to collect subscriptions last year.
One was the Rome-based Cooperlavoro, the fund for workers employed by cooperatives nationwide. "The fund currently has some 12,400 members out of a potential 330,000," said Flavio Casetti, the president. "We appointed IMI-San Paolo, Mediolanum/State Street, and Unipol/Citibank - all Milan-based - to manage one-third each of 35 billion lire in assets." The fund's targets are 25% European stocks, and 75% bonds, of which up to 10% can be invested in U.S.-dollar bonds.
In December, Solidarieta Veneto, the fund open to workers in the Veneto region, followed suit. Its managers are INVESCO, ARCA and Unipol. The fund now offers only one investment approach, said Franco Deotti, an administrator with the Venice-based fund, "but we plan to go multicompartment by the middle of the year. Over a period of time we have had requests - especially from our younger members - for a more aggressive approach to investing. That said, with the poor performance of the stock market in recent times, we suspect that when we poll our members many will opt for the more conservative, bond-based line."
The other regional fund, Laborfonds, became fully operational at the end of 2001, too. "Our managers are San Paolo-IMI for euro bonds and Italian equities; Odier for European equities; and ING for global bonds," said Giorgio Valzolgher, operations manager for the Bolzano-based fund. "We are about to choose a manager for North American equities," he added.
In the meantime, others are waiting in the wings. For Genoa-based Fonligure, the 1,000-strong fund for the crafts workers in the Liguria region of northern Italy, Luca Costi complained about the time taken by COVIP, the Rome-based regulatory body, to hand down decisions. "We have appointed our fund managers (Intesa Sgr and Eptafund Sgr) and just need the COVIP to OK the contracts. We submitted them in October and now, nearly six months later, we have no news."
Mr Costi expressed concern that delays such as these would deter potential members.
"It's already hard enough to persuade Italian workers that they need to make their own arrangements for their pensions and that the government will not be able to provide. If we look as if we are losing steam, they are going to give up on us too. We need to avoid that at all cost."
And some funds are not doing well. Mr. Costi said some are "having such difficulty and are looking to merge or make other arrangements."
Despite the difficulties, more funds are being set up. Since January 2001, four have been authorized to start signing up members. These are Gommaplastica, for workers in Italy's rubber and plastics industry; Mediafond, for the workers employed by the Mediaset TV company; Prevaer, for Italy's airport workers; and Byblos, the fund for workers in the paper and cardboard industry, as well as graphics and publishing.