REGULATION OF SUPPLEMENTARY PENSIONS
PRESS RELEASE
PRESS RELEASE
PENSION BENEFITS DECREE (TFR): ANTITRUST SAYS
GUARANTEE FUND RISKS DISTORTING COMPETITION
Recommendation to the Government and
the Presidents of the House and Senate
The functioning of the Guarantee Fund foreseen in the latest version of the legislative decree on retirement benefits could lead to the distorting of competition. This point was made to the Government and the Presidents of the House and Senate by the Italian Competition Authority in a recommendation approved at its meeting of 28 September; the document also reiterates the Authority’s positive view of the development of supplementary pension benefit schemes, an objective pursued by the decree.
In the view of the AntitrustAuthority, already expressed in the past, practically automatic access to credit guaranteed by a fund financed by the State may have negative effects on a particularly sensitive market like bank lending. Furthermore, for the provision of subsidised credit from the fund, the interested parties should have to measure themselves with the market, especially as regards interest rates. Such competitive pressure seems to be precluded by the ABI-Government protocol which fixes the maximum interest rate at 4.16%, thus tending to harmonize lending income irrespective of risk exposure.
In any case, thinks the Authority, compensative measures of this sort, useful though they may be if differently configured, should be only temporary precisely because they are intended to help businesses overcome the difficulties involved in changing their sources of financing.
In its recommendation, the Authority also points out, as it had already done on 26 July 2005, the need to guarantee that employees have a real choice amongst alternative forms of superannuation. In the latest version of the decree, instead, this freedom of choice becomes uncertain because of the limitations on where the employer’s contributions may go. According to the draft decree, such contributions may be transferred where the employee decides only within the limits and under the conditions established by the relevant workplace agreement. The Authority emphasizes that this is an arrangement which favours choices resulting from union negotiations rather than the choice of the individual employee and may influence the whole pension scheme setup, significantly changing the nature of the future marketplace for supplementary pension benefits. The result is that the demand side would be represented mainly if not exclusively by the parties involved in negotiating workplace contracts and not by individual employees and the supply side cannot be represented other than by collective forms of pension, mostly mutual funds, to the exclusion of individual insurance-type plans.
In the Authority’s view, then, in terms of preserving competition, the changes introduced by the new draft decree may create important obstacles to the development of a broad market in supplementary pension benefits offering a multiplicity of choices. Instead, moves toward transparency and simplification should be used to ensure basic comparability between the different kinds of pension: this would help bridge the gap between insurance-type pensions and pension funds, especially as regards regulation and contractual and economic conditions. This would increase competitive pressures and the incentives for greater efficiency and have positive effects on the costs borne by employees for their supplementary pension benefits.
Rome, 29 September 2005