Supplementary pension schemes in Italy: features, development and opportunities for workers
AbstractParticipation in supplementary pension funds allows workers to exploit tax benefits and payroll employees to take advantage of employer contributions. The simulations reported in the paper show that these two components can considerably increase workers' retirement wealth. Data show that returns on supplementary pension funds may be greater than the revaluation rate of the so-called Trattamento di fine rapporto (Tfr, severance pay entitlements that also serve as provision for old age and are funded by workers' contributions). As for the liquidity of accrued positions, recent changes in the law give retirement wealth held in pension funds a degree of flexibility comparable to that of the Tfr. The paper shows that scale economies may be substantial. Cost moderation also requires transparency and comparability of charges and fees: they are also essential in stimulating competition and allowing workers to move freely from expensive retirement schemes to schemes charging lower fees. In this respect the limits on the portability of employer contributions discourage worker mobility across different pension schemes. Italian workers seem to overestimate the level of the future public pension. This result suggests the importance of strengthening public efforts aimed at providing workers with appropriate information, to make them aware of their retirement position.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Questioni di Economia e Finanza (Occasional Papers) with number 8.
Date of creation: May 2007
Date of revision:
pension funds; retirement; financial education; employer contributions; management fees; TFR;
Other versions of this item:
- Riccardo Cesari & Giuseppe Grandi & Fabio Panetta, 2008. "Supplementary Pension Schemes in Italy: Features,Development and Opportunities for Workers," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 67(1), pages 21-73, March.
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
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