12 June 2015

IPE: Italian regulator calls for consolidation of pensions industry

In its 2014 annual report, Italy’s pension fund regulator Covip (Commissione Vigilanza sui Fondi Pensione) revealed that, while membership in complementary or second-pillar pension schemes climbed last year, the number of people who had stopped contributing rose by a similar amount.

Presenting the report, Covip president Francesco Massicci said: “The present moment calls for a decisive paradigm shift on the part of the funds.”  This shift is necessary, he said, in terms of their internal organisational processes, their capacity to manage risks and deal with competition, changing their investment policies towards an allocation that better suits changes in the market and finding a size that is in the interests of all scheme members. 

At the end of 2014, complementary pension schemes covered 6.5m people in Italy, or 29.4% of workers, he said. This compares with the 6.3m people covered, which was reported a year earlier.  Massicci put much of the growth in pension scheme membership down to sales networks for PIPs, which were spread throughout the country, with sales remunerated based on the volume of products placed on the market. 

But he said there were signs of new dynamism within company pension schemes, with a significant increase in membership expected in the construction industry as a result of a newly introduced auto-enrolment regime. Total assets within the second-pillar pension system reached €131bn at the end of 2014, up 12% from the year before.

“In 2014,” Massicci said, “pension schemes reported positive returns, benefiting from good progress on the main financial market and helped by very expansive monetary policy and the improved economic conditions globally, despite differences regionally.” Massicci said investment in direct and indirect real estate, and closed-end funds, was done almost exclusively by pre-existing funds, and pointed out that only 35% of assets, or €34.5bn, were invested in Italy, with €28bn of this in government bonds.

Investments in securities issued by Italian companies came to only 3% of pension fund assets, with just 0.8% of assets invested in Italian equities. “There is room, therefore, for pension funds to make a greater contribution to the financing of domestic enterprises and, more generally, to medium and long-term investment projects in our country,” the regulator said.

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