Is the deadline for reforming Italy’s pension funds unrealistic?
The deadline for implementing reforms to the Italian pension system has arrived but many of the affected funds have yet to apply the new rules (Alessia Pierdomenico/Bloomberg)
Italian supplementary pension funds fear the timeframe for implementing the reforms of the pension system, as set out by Italian regulator Covip, is too tight.
Published in January and due to come into force on July 1, the snappily-titled Italian Legislative Decree No. 199/2025 will bring a wave of changes to the country’s supplementary pension funds, including mandatory provision of a default life-cycle-based investment option and the portability of employer contributions.
Although the pension funds polled by AOX agree on the need to overhaul the current system and have welcomed the move, many are wondering whether the six-month implementation deadline is simply unrealistic.
Francesco Vallacqua, general director at the Fondo Pensione per i Professori Ordinari e Dirigenti dell'Università Bocconi, is among those who openly criticise the implementation method, the timetable, the communication and the level of operational preparedness required from pension fund operators.
Vallacqua, who also currently acts as a fund manager for an open-ended fund and pension insurance scheme at insurer Vittoria Assicurazioni, predicts that many of the pensions affected by the new legislation may not be operationally ready by today’s deadline and will therefore require exemptions or transitional arrangements.
“I believe that policymakers have a limited understanding of how pension funds operate in practice, with the result that they impose requirements that are difficult to meet within the specified timeframe,” he tells AOX.
One of the measures under discussion regards automatic enrollment into a lifecycle framework, in which a member’s exposure to risk assets reduces in phases as they draw closer to retirement. According to many pension funds, implementing the measure within such a short timeframe presents a number of operational challenges – and not just for the pension funds that don’t already offer lifecycle options.
A long-awaited change - but with operational setbacks
The €1.4bn ($1.6bn) Rome-based Fondo PreviAmbiente, for example, is a pioneer of a lifecycle structure in Italy, having implemented it more than two years ago. However, as Valentina Roticiani, the fund’s finance manager, explains, delays from Covip in dictating how the new law should be implemented are having an impact on the pension scheme industry as a whole.
According to Roticiani, one of the challenges for her pension fund lies in the fact that the new statutory automatic enrolments could clash with the existing contractual enrolments already mandated by the system’s collective bargaining agreement. However, there is a lack of regulatory clarity on where such clashes might occur.
“We (supplementary pension funds) urgently need the supervisory authority to provide clear operational and formal guidance on how to manage these distinct cases and coordinate the two frameworks,” she says.
The regulatory framework requires pension funds to produce standardised documentation relating to the new default investment and contribution strategy, leaving no room for independent interpretation. “These documents require formal review and approval by the funds’ board and the legal time directly clashes with the delay in [further regulatory directives from Covip],” Roticiani explains.
When tech comes into play
The complexity further increases when technology comes into the picture. Restructuring systems to comply with the new legislation requires a secure network on which scheme members can access their pension information.
“Because we began the implementation process with our administrative provider before the new rules were even published, we are already equipped to roll out the lifecycle model,” Roticiani explains. “The broader issue, however, is that replicating this operational setup across all supplementary funds demands rigid timeframes, posing a critical challenge for the entire pension system.”
The complexity increases significantly due to the limited number of Italian administrators capable of providing the IT infrastructure required to support a lifecycle model and the transfer of members’ rights within the scheme.
This inevitably leads to delays to the speed at which certain funds are able to adopt the new rules, while further increasing worries around security and privacy.
“Technical implementation timelines simply cannot be compressed into such a short period. Policymakers seemingly fail to grasp that system security must be prioritised over rigid statutory deadlines,” Roticiani says.
“In an era of AI and complex emerging technologies, rushing the implementation at the expense of a secure, properly functioning framework is simply not an option,” she adds.
Challenges, however, are not limited to standardisation and automation mechanisms among scheme operators. When the new law was published in January a measure increasing the tax deductible contribution limit was brought into force, while from July, there will be increased flexibility around the rules governing lump-sum withdrawals and annuity options. Roticiani emphasises that tax issues must be understood and correctly applied.
“Before rolling out the new annuity options, we urgently need formal clarification on their tax implications,” she says, adding: “This is crucial to guarantee the correct tax treatment and prevent any errors affecting our members’ benefits.
“Ultimately, this represents another hurdle that makes the current implementation deadlines unrealistic.”
Funds-members relationships at stake
In addition to the logistical hurdles, pension funds fear that they have not had sufficient time to properly inform their members about the changes.
As Covip has not yet told some pension funds whether their lifecycle plans comply with the regulatory criteria, some pension funds believe that the regulator’s lack of speed in approving plans could hinder members’ understanding of what the changes actually entail.
At the time of writing, pension funds, such as the $3.7bn Fondenergia, have yet to receive any notification from Covip regarding the need to amend their lifecycle profile to meet the final requirements.
“For us, the challenge would not be so much explaining the lifecycle approach to members, but rather helping them understand that the new offering is different from last year’s - both for those who are already enrolled and for those who read last year’s instructions and now find themselves facing something different," Michele Pardini, head of finance at Fondenergia, explains.
Vallacqua warns that such confusion could prove detrimental for relationships between these funds and their members: “Automatic portfolio reallocation mechanisms are considered potentially risky if members are not clearly informed that they may choose not to opt in on a case-by-case basis.”
The erosion of trust between member and scheme is even more worrying when the pension pot portability is added to the equation as this will significantly increase competition among supplementary pensions, open pension funds and individual pension plans.
Claudio Varani, general director at $307mn Fontedir, the pension fund for Telecom Italia, explains: “Generally speaking, the returns generated by collectively negotiated pension funds are higher than those of open pension funds and individual pension plans. However, beneficiaries only fully appreciate this difference when they have a strong understanding of how these mechanisms work,” Varani explains.
Three years ago, Fontedir launched a series of monthly newsletters, each focusing on a specific topic relating to pension funds, with the aim of establishing a direct channel of communication with members, precisely to deal with similar situations, explains Varani.
“Reinforcing messages through communication does not solve the problem overnight. But by doing it consistently you help prepare people for transition events such as this new lifecycle transition and others,” he concludes.