The presentation of the annual report on the activity carried out by COVIP in 2021 was held today, Friday 10 June 2022 in Rome in the Chamber of Deputies
In addition to illustrating the state of the supervised sectors (pension funds and pension funds) -whose resources have exceeded 310 billion euros in total, which affect about eleven million people between partners and retirees- , the President of COVIP, Mario Padulafocused on the evolutionary perspectives of these sectors, also in view of the current situation.
At the end of 2021, there were 349 pension funds in Italy: 33 negotiated funds, 40 open-ended funds, 72 individual pension plans (PIPs) and 204 pre-existing funds. The number of pension plans operating in the system is steadily declining. More than twenty years ago, in 1999, there were 739 wheels, more than double.
Members and memberships
At the end of 2021, the total number of members of the supplementary pension scheme was 8.8 million, 3.9% more than the previous year, with a coverage rate of 34.7% of the total workforce. Existing charges are $ 9.7 million (including double or multiple charges, which refer to the same member). Goodwill has 3.4 million subscribers, nearly 1.7 million subscribers to open funds and 3.4 million to “new” PIPs; about 620,000 are registered in pre-existing funds. With regard to gender and generational gaps, already documented trends are confirmed. 61.8% of men are members of supplementary pensions (73% in negotiated funds). The age distribution sees the prevalence of the middle classes and those closest to retirement age: 50.3% of members are between 35 and 54 years old, 31.9% are at least 55 years old. In terms of geography, the majority of members live in the northern regions (57%).
Resources, contributions and benefits
At the end of 2021, the resources accumulated by the supplementary pension schemes amounted to 213.3 billion euros, an increase of 7.8% over the previous year: an amount equal to 12% of GDP and 4.1% of financial assets of Italian households. 2 Contributions collected during the year amounted to approximately € 17.6 billion, returning to growth in pre-pandemic levels. 5.8 billion in trading funds (+ 5.5%), 2.6 billion in open funds (+ 12.7%), 4.9 billion in PIP (+ 6.8%) and 4 billion in PIP (+ 6.8%) pre-existing funds (+ 3.1% )%)). Contributions per individual member amount to an average of € 2,790 throughout the year. 27.2% of all members of the supplementary pension scheme (approximately 2.4 million) did not contribute in 2021. More than one million people have not contributed for at least five years. In addition, this phenomenon is severely affected by the mechanism of contractual accession to goodwill, especially in sectors such as construction, which are characterized by a high discontinuity in employment. Outflows for pension management amounted to 11.4 billion euros. Retirement benefits were paid in capital for 5.1 billion euros and annuities for about 460 million euros. Reimbursements amounted to 2 billion euros and advances to 2,300 million euros, largely related to health expenses for the purchase or renovation of the first home. During the year, approximately € 1.3 billion of advanced temporary supplementary annuities (RITA) were disbursed, mostly concentrated in pre-existing pension funds.
The allocation of investments made by pension funds (excluding mathematical reserves with insurance companies and domestic funds) records the prevalence of participation in government bonds and other debt securities, for 53.7% of assets: 16.8% are Italian government debt securities. Equity increased to 22.6% (compared to 19.6% in 2020) and also UCITS holdings, from 15.5 to 16%. Deposits stood at 6.7%. Real estate investments, directly and indirectly, present almost exclusively in pre-existing funds, represent 1.9% of assets, substantially stable compared to 2020. Overall, the value of pension fund investments in the Italian economy (values issued by entities resident in Italy and real estate) is 40 billion euros, 22.7% of assets. Government bonds represent the largest share, 29.6 billion euros. Loans in domestic business securities remain marginal, although they are growing slightly. The total of 4.7 billion is less than 3 percent of assets: 3 billion is invested in bonds, 1.7 billion in shares. To these must be added the national investments maintained through UCITS, amounting to 2.3 billion. Real estate investments in Italy amounted to about 3 billion.
Returns and costs
Despite the high volatility, the performance of the financial markets in 2021 was globally positive thanks to the initiatives implemented by governments and central banks to deal with the pandemic, supporting global demand and the spread of vaccines, with the consequent relaxation of restrictions. Pension fund returns also benefited. Net of management costs and taxes, trading funds and open-ended funds had an average return of 4.9 and 6.4 percent, respectively; for the “new” Class III PIPs, the return was 11 percent. For segregated Class I accounts, which represent assets at historical cost 3 and not at market values and whose returns depend to a large extent on the coupons collected from the securities held, the result was 1.3 per one hundred. In the same period, severance pay was revalued, net of taxes, by 3.6 percent. Taking into account the last 10 years, the average annual return on negotiated pension funds was 4.1 per cent, that on open pension funds was 4.6 per cent and that on “new” PIP class III was 5 per cent. while it was 2.2 for those in the Class I period. The average annual revaluation of severance pay was 1.9 percent.
In 2021, the process for the introduction of the Pan-European Personal Pension Products (PEPP), new individual supplementary pension instruments, has continued. The European Regulation, approved in 2019, has been in force since March this year. The issue of the legislative decree for the adaptation of national legislation is close. Convinced that PEPPs can play a positive role in the system, intensifying competition and, therefore, improving their efficiency, COVIP has been actively involved in the work, also aimed, at an international level, at regulating many aspects of implementation. of the new provisions. The expected positive contribution of PEPPs to the national market presupposes a balanced approach, starting with the supervisory model: in fact, effective progressive harmonization of supervisory practices at European level is needed; There is also a need for clear confirmation, at national level, of the model already in place for supplementary individual pension schemes (open-ended funds and PIPs), which provides for shared competition between COVIP supervision, the social security nature of related issues, and the supervision of other Sector Authorities, mainly with the aim of stabilizing banking, financial and insurance companies. With regard to the dissemination of PEPPs, the tax system will also play an important role. In compliance with the criteria set out in the European Delegation Act 2019-2020, PEPPs should be expanded with tax benefits similar to those granted to national pension schemes. It will be important to gauge the benefits in order to create a level playing field where competition with existing products can be fully deployed. In this context, it is necessary to reflect carefully on the application of the same concession regime to PEPPs that adopt models not allowed by national forms, such as individual portfolio management. Individual managements, usually more expensive than collective ones and aimed at a more affluent community, do not integrate those characteristics of accessibility for a wide and diversified public, which make pension products deserve a system of subsidies.
THE BASIS OF SOCIAL SECURITY
Since 2011, precisely because of the experience gained in the contiguous sector of pension funds, COVIP has also supervised the investments of pension funds, in an articulated structure of controls in which the Authority works together with the Ministries. of Labor and Economy, which is responsible for verifying the overall stability of the entities. Despite the continued absence of the Regulation on investment regulation provided for by Decree-Law 98/2011, COVIP has nevertheless developed its supervisory role, transmitting analytical reports annually to the Ministries of Labor and Economy in the final balance sheet. of the management of each of the 20 cash registers and carrying out different in-depth analyzes on specific aspects of the management, also following the requests of the supervising ministries. The data and information acquired in the framework of its activity allow COVIP to have an information asset of which the Authority reports annually, making available, also through its website, the Framework Summary on the most significant aspects. emerged from the surveys conducted. This ever-increasing wealth of information can not only facilitate knowledge of the sector, but can also be a useful tool for organic regulation initiatives.
At the end of 2020, the total assets of pension funds amounted, at market values, to 100.7 billion euros, an increase of 4.7 billion over the previous year (5%). From 2011 to 2020, these activities grew by a total of 45 billion euros, equivalent to 80.8%. Given the dynamics of sustained growth in the aggregate, differences remain, even large, in the assets of individual banks: approximately 74% of the assets belong to the 5 largest entities, the first 3 grouping approximately 55 % of total. 6 Taking into account also the components of equity and liabilities underlying the UCITS that remain, the largest part of the assets is constituted by debt securities, equivalent to 36.4 billion euros (corresponding to 36.2% of the total) . The composition of the assets held continues to be characterized by the significant presence of real estate investments, which together (own assets, real estate funds and participations in controlled real estate companies) amount to 19.6 billion euros (19.4% of the total). In the five-year period 2016-2020, the incidence of this component, in any case, has decreased by 4.4 percentage points. It should also be noted that in 6 cases the real estate component exceeds 30% of the assets and in one of these the incidence is still higher than 50%. Investments in the Italian economy (securities issued by subjects resident in Italy and real estate) amounted to 34.9 billion euros, equivalent to 34.6% of total assets.
In the Covip Report article, pension funds are growing and always double the severance pay coming from Welfare.