The market for annuities in Italy: reality or chimera? – CeRP

(1)

The market for annuities in Italy:

reality or chimera?

♦

Preliminary results

Preliminary results of research by a study group including of research by a study group including Elsa Elsa ForneroFornero (

(University of Turin and CeRPUniversity of Turin and CeRP) and ) and Margherita BorellaMargherita Borella, Carolina , Carolina Fugazza

Fugazza and and Giacomo PonzettoGiacomo Ponzetto(CeRP)(CeRP) ♦

♦

Turin, 21

Turin, 21--22 June, 200222 June, 2002

CeRP, Centre for Research on Pensions and Welfare Policies

Via Real Collegio 30 – 10024 Moncalieri (TO) – Italy - Tel. +39 011 6402402 – Fax: +39 011 6403680 E-mail: cerp@cerp.unito.it - http://cerp.unito.it

(2)

Plan of the work

CeRP - 2 Turin, 21-22 June, 2002

1. A very thin m arket

2. Pre-requisites from the dem and side

2.1 H ouseholds’ attitude tow ard annuities

2.2 Percentage of households participating in the m arket and average contribution by year

2.3 H ouseholds’ characteristics by participation in the m arket 3. Pension policy

3.1 The dim inishing M oney’s w orth for younger and future generations

3.2 The relative ineffectiveness of legislation on pension funds

3.3 Fiscal treatm ent

4. The annuity industry’s supply side 5. Features of the m arket

5.1 Segm entation 5.2 Liquidity

5.3 Different players w ith different rules 5.4 Investm ent options

5.5 Financial risks and guarantees 5.6 Dem ographic risks

5.7 Pricing 5.8 Costs

6. Com parison betw een different m ortality tables 7. Conclusions

(3)

1. After 10 years of intensive legislative

action, the Italian annuity market:

•

• i

i

s still very small, although with

considerable growth potential

¾

Why is it very small?

¾

Will its potential be realized?

(4)

2. Pre

-

requisites from the demand side

•

• Partial inadequacy of public pensions

Partial inadequacy of public pensions

•

• Economic advantages in terms of:

Economic advantages in terms of:

–

fiscal incentives

–

net returns

•

• Confidence in the market

Confidence in the market

–

full information and transparency

–

professional competence

–

good supervision and governance

(5)

2.1 An analysis of households

’

attitude

toward annuities

• • • AAAnnnaaalllyyyssisiisss bbbaaassseeedd d ooonnn IIItttaaalliliiaaannn mmmiiicccrrrooo---dddaaatttaaa (((SSSuuurrrvvveeeyyy ooonnn HHHooouuussseeehhhooollldddsss’’’ I I Innncccooommmee e aaannnddd WWWeeaeaalllttthhh,,, SSSHHHIIIWWW))) • • • TTThhheee uuussseee ooofff rrreeepppeeaeaattteeeddd cccrrrooossssss---ssseeeccctttiiiooonnnaaalll ddadaatttaaa (((fffrrroomomm 111999888999 ttotoo 222000000000))) a a allllllooowwwsss tttooo iiidddeeennntttiiifffyyy,,, aaammmooonnnggg ooottthhheeerrr tththhiiinnngggsss,,, ttthhheee eeeffffffeeecctcttsss ooofff ccchhhaaannngggeeesss iiinnn p p puuubbbllliiiccc pppeeennnsssiiiooonnn wwweeaeaalllttthhh aaannndd d iiinnn fffiiissscccaalall iiinnnccceeennnttitiivvveeesss ooonnn pppaaarrrtttiiiccciiipppaaatttiiiooonnn iiinnn a a annnnnnuuuiiitttyyy mmmaaarrrkkkeeettt... • • • PPPrrreeellliiimmmiiinnnaaarrryyy aaannnaalallyyysssiiisss ssshhohoowwwsss ttthhhaaattt hhhooouuussseeehhhooollldddsss’’’ pppaaarrrttitiiccciiipppaaatttiiiooonnn iiinnn ttthhheee m m maaarrrkkkeeettt aasass wwweeellllll aaasss aaammmooouuunnnttt iiinnnvvveeesssttteeeddd hhhaaavvevee bbbeeeeeennn gggrrrooowwwiiinnngg g iiinnn ttthhheee d d deeecccaaadddeee... YYYooouuunnngggeeerr r aaannnddd wwweeeaaalllttthhhiiieeerrr hhhooouuussseeehhhoololldddsss aaarrreee mmmooorrreee llliiikkkeeelllyyy tttooo i i innnvvveeesststt iiinnn aanannnnnuuuiiitttiiieeesss... • • • PPPrrreeellliiimmmiininnaaarrryyy rrreeesssuuullltttsss ssshhhoooww w ttthhhaaattt aaa rrreeeddduuuccctttiiiooonnn iiinnn sssoooccciiiaaalll ssseeecccuuurrriiittytyy wwweeeaaalllttthhh i i innnddduuuccceeesss aaannn iiinnncccrrreeaeaassseee iiinnn ppapaarrrtttiiiccciiipppaatattiiiooonnn iiinnn ttthhheee mmmaaarrrkkekeettt (((rrreeesssuuullltttsss nnnooottt s s shhhooowwwnnn)))... CeRP - 5 Turin, 21-22 June, 2002

(6)

2.2 Percentage of households participating in the

market and average contribution by year

CeRP - 6 Turin, 21-22 June, 2002 1989 1991 1993 1995 1998 2000 Deferred annuities % Participants 18.71 23.86 28.40 27.71 30.96 30.28 Average contribution 160.34 232.25 322.73 355.97 456.04 390.77 Contrib. conditional on participation 857.18 973.48 1136.39 1288.40 1482.93 1299.19 Pension Funds % Participants 6.88 7.68 9.94 8.16 9.33 15.52 Average contribution 91.56 109.12 142.20 153.68 165.49 282.86 Contrib. conditional on participation 1330.82 1421.21 1430.82 1787.40 1697.91 1822.95 Number of families 5,378 4,858 4,236 4,140 3,753 3,738

Note: monetary values are expressed in euro at constant prices (year 2000)

(7)

2.3 Households’ characteristics by participation in

the market

Deferred Annuities Pension Funds DA+PF Total

Head Age 43.99 43.08 43.81 44.19

Head Married 0.88 0.83 0.86 0.84

Head Male 0.89 0.87 0.88 0.87

Head Higher Edu 0.57 0.62 0.58 0.46

Head Self-Employed 0.35 0.38 0.35 0.27 # Income Recipients 1.86 1.86 1.86 1.75

# HH Components 3.50 3.21 3.43 3.41

Resident in the South 0.30 0.12 0.26 0.36 Disposable Incom e 37386.50 40468.51 37492.65 30765.62 Net W ealth 208631.00 221453.20 206256.60 145940.50

N. of Obs. 6809 2432 8431 26103

Note: monetary values are expressed in euro at constant prices (year 2000)

Sample selection: households headed by person active in the labour market and non-unemployed Source: SHIW , various years

(8)

CeRP - 8

3. Pension policy since 1992

–

Reforms have reduced public pension benefits for

younger and future generations, but have not cut

payroll tax rates

–

As for private pensions, in the trade off between

paternalism

-

guarantees and risks

-

returns, the second

option has been chosen

–

The severance pay

-

TFR

-

flows have been

erroneously regarded as a “free” source of private

pension financing

(9)

3.1

3.1 -

-

The diminishing Money’s

w

orth

for

younger and future generations

Money’s worth measures (per cent)

Regime Cohorts _{IRR RR NPVR}

EB ₁₉₄₃ _{3.25 68.3 143} 1948 3.06 70.4 136 1953 2.83 71.1 127 Pro rata ₁₉₅₈ _{2.31 64.7 109} 1963 2.07 62.9 102 1968 1.85 60.1 95 1973 1.58 57.6 88 CB ₁₉₇₈ _{1.57 57.5 87} 1983 1.57 57.5 87

EB: earnings based; CB: contribution based; the first reflects pension formula before 1995 reform; the third reflects the new notional defined contribution method introduced in 1995 and the second reflects the slow phasing in of the new method.

Source: E.Fornero-O.Castellino (eds.), La riforma del sistema previdenziale italiano, Il Mulino, 2001.

(10)

3.2

3.2 -

-

The relative ineffectiveness of

legislation on pension funds

8

8 Many different laws directed at

Many different laws directed at

¾

granting fiscal advantages

(only nominal?

hampered by TFR diversion?)

¾

“Securitization

“

Securitization”

”

(too complex)

¾

compulsory diversion of TFR flows

(payroll tax

rates already too high?)

8

8 With the aim of:

With the aim of:

¾

maintaining for the diverted TFR funds the

same liquidity of present TFR (precautionary

savings vs. retirement savings)

¾

encouraging

annuitization

CeRP - 10 Turin, 21-22 June, 2002

(11)

3.3 Fiscal treatment

Type of income Contributions deductible up to the lowest among:

Labour income of employees

with TFR provision - twice the amount of thediverted TFR flow - 12% of income

- € 5165

All other incomes _{- 12% of income} - € 5165

For dependent members: Income of supporting head of household regardless of its source - 12% of income - € 5165 a) Contributions a) Contributions CeRP - 11 Turin, 21-22 June, 2002

(12)

b) Accumulation phase

¾

Reduced tax rate on investment income:Reduced tax rate on investment income: 11% instead of 12.5%

11% instead of 12.5%

¾

¾ Capital losses deductible from future taxable Capital losses deductible from future taxable capital gains with no time limitation

capital gains with no time limitation

c) Payment phase

i. Life annuity upon retirement

¾

¾ All investment income (already taxed at 11% during the All investment income (already taxed at 11% during the accumulation phase) is tax exempt

accumulation phase) is tax exempt

¾

¾ All investment income earned during the payment phase is All investment income earned during the payment phase is taxed at 12.5%

taxed at 12.5%

¾

¾ Progressive general income tax is due only on the annuity Progressive general income tax is due only on the annuity resulting from the sum of original contributions without

resulting from the sum of original contributions without

considering any returns

CeRP - 12 Turin, 21-22 June, 2002

(13)

ii. Tax

-

advantaged capital withdrawal options:

-- complete redemption upon unintentional job terminationcomplete redemption upon unintentional job termination

-- complete redemption by the heirs of a deceased participantcomplete redemption by the heirs of a deceased participant

-- partial redemption or advances during working life and partial partial redemption or advances during working life and partial lump

lump--sum withdrawal at retirement, totalling no more than 1/3 sum withdrawal at retirement, totalling no more than 1/3 of accumulated fund

of accumulated fund

-- complete withdrawal complete withdrawal asas aa lumplump--sum at retirement if the sum at retirement if the

annuity is lower than 50% of the “social allowance” (currently

∈

∈4438 yearly)4438 yearly) 9

9All investment income (already taxed at 11% during the All investment income (already taxed at 11% during the accumulation phase) is tax exempt

accumulation phase) is tax exempt

9

9 The sum of original contributions is taxed at the average The sum of original contributions is taxed at the average income tax rate of the previous 5 years

income tax rate of the previous 5 years

CeRP - 13 Turin, 21-22 June, 2002

(14)

iii. Other capital withdrawal options:

-- complete redemption upon intentional job terminationcomplete redemption upon intentional job termination 9

9 The netThe net--ofof--returns redeemed amount is taxed at returns redeemed amount is taxed at the marginal income

the marginal income--tax ratetax rate

-- partial redemption or advances during working life and partial redemption or advances during working life and lump

lump--sum withdrawal at retirement, totalling sum withdrawal at retirement, totalling moremore than 1/3 than 1/3 of accumulated fund

of accumulated fund

9

9 The The wholewhole redeemed amount redeemed amount is taxed at the is taxed at the average income tax rate of the previous 5 years

average income tax rate of the previous 5 years

CeRP - 14 Turin, 21-22 June, 2002

(15)

Remarks:

•

• Complex system, not free from ambiguities, but

Complex system, not free from ambiguities, but

allowing differential treatment of advantaged and

disadvantaged pay

-

out options

•

• (Disregarding the condition on TFR diversion),

(Disregarding the condition on TFR diversion),

great generosity to annuitants: investment returns

are

never

taxed as ordinary income if an annuity is

eventually taken out, making the effective tax rate

lower than in a pure E

-

E

-

T pension scheme

•

• The higher the investment returns, the lower the

The higher the investment returns, the lower the

effective tax rate: an incentive to risk

-

taking?

•

• A regressive tax regime, that reduces the overall

A regressive tax regime, that reduces the overall

progressivity

of income tax

CeRP - 15 Turin, 21-22 June, 2002

(16)

4. The annuity industry’s supply side

•

• Insurance companies have largely

Insurance companies have largely

disregarded annuities so far:

–

assuming demand to be insignificant

–

finding other policies (purely financial

instruments) far more popular and profitable

•

• Renewed interest after reforms have

Renewed interest after reforms have

given scope for funded pensions

CeRP - 16 Turin, 21-22 June, 2002

(17)

5.

5. Features of the market:

Features of the market:

5.

5. 1. Segmentation

1. Segmentation

Demand Side

Supply Side

Private

employees employeesPublic Non typical workers employedSelf- dependantsHousehold

Collective participation • TFR diversion • Employer contributions • Tax advantage Collective participation • Tax advantage Individual participation • Tax advantage Individual participation • No TFR diversion • No employer contributions • No tax advantage Employers’ and Employers’ and employees’ employees’ representatives representatives

Banks and other

financial financial companies companies Insurance Insurance companies

companies associationsassociationsTrade Trade Housewives’ Housewives’ associationsassociations Occupational

Pension Funds _{Pension Funds}Open _{Pension Policies}Individual _{Pension Funds}Occupational

CeRP - 17 Turin, 21-22 June, 2002

(18)

a)

Capital withdrawal options

-- complete redemption by the heirs of a deceased participant complete redemption by the heirs of a deceased participant

-- complete redemption upon job terminationcomplete redemption upon job termination →

→ more more favourable tax treatment if termination is involuntaryfavourable tax treatment if termination is involuntary

-- advance (for participants to collective pension plans) or partiadvance (for participants to collective pension plans) or partial al redemption (for participants to individual pension plans) when a

redemption (for participants to individual pension plans) when a

TFR advance would have been possible

→

→ favourable tax treatment only if withdrawn amount is no more favourable tax treatment only if withdrawn amount is no more than 1/3 of the total

than 1/3 of the total

-- lumplump--sum withdrawal upon retirement, up to 50% of the totalsum withdrawal upon retirement, up to 50% of the total →

→ favourable tax treatment only if withdrawn amount is no more favourable tax treatment only if withdrawn amount is no more than 1/3 of the total

than 1/3 of the total

-- lumplump--sum withdrawal upon retirement, when the resulting sum withdrawal upon retirement, when the resulting annuity would be lower than the “social allowance” (currently

annuity would be lower than the “social allowance” (currently _∈_∈

4438 yearly)

→

→ favourable tax treatment only if the resulting annuity would befavourable tax treatment only if the resulting annuity would be lower than

lower than 7575% of the “social allowance” % of the “social allowance”

5.2. Liquidity

CeRP - 18 Turin, 21-22 June, 2002

(19)

b)

Mobility between pension plans

•

• Participants in any pension plan may transfer to an

Participants in any pension plan may transfer to an

occupational Pension Fund whenever they become

eligible for participation after changing employment

•

• Participants can switch from an occupational

Participants can switch from an occupational

Pension Fund to any individual pension plan (open

Pension Fund or FIP) subject to minimum

-

stay

requirements: but if they do they can no longer

enjoy employer contribution nor divert their TFR

flows, and thus lose all tax advantages

•

• Participants may freely switch from an individual

Participants may freely switch from an individual

pension plan to another, subject to minimum

-

stay

requirements: but the pricing structure of FIP

(though not of open Pension Funds) usually

discourages switching

CeRP - 19 Turin, 21-22 June, 2002

(20)

5.3

5.3 . Different players with different rules

. Different players with different rules

CeRP - 20 Occupational

Pension Funds Open PensionFunds Pension PoliciesIndividual (FIP)

Assets

owned by the Pension Fund,whose board of directors is

appointed by employers and employees in equal shares

the Pension Fund, whose director is appointed by the incorporating financial firm or insurance company the Insurance Company,

separately from its other assets

Assets

managed by asset managementcompanies selected by the Pension Fund directors the incorporating financial firm or insurance company, acting in the sole interest of the Pension Fund

the Insurance

Company, acting in the sole interest of the insured

(21)

CeRP - 21

5.4. Investment options

Occupational Pension

Funds Open Pension Funds Individual Pension Policies (FIP) Unit-linked annuities With-profits

annuities • Currently: single

investment line in all Pension Funds

(except the Dentists’ Pension Fund already operating in multiple lines)

• In preparation for most Pension Funds: multiple investment lines as in open Pension Funds • Multiple investment lines: typically 3-5 • Individual participation allowed for one line at a time • Possibility to switch

once a year

• Individual

participation in more than one investment fund at a time

• Possibility to switch whenever desired (at a cost)

• Funds of funds and age-specific portfolio allocation sometimes offered • Investment in safe bonds (mainly BTP) through a separately managed account which is not marked to market and carries a year-on-year return guarantee

• A with-profits annuity may be offered as one of the investment options in a unit-linked annuity

(22)

5.5. Financial risks and guarantees

a) Accumulation Phase

CeRP - 22

Funds Open Pension Funds Individual Pension Policies (FIP) Unit-linked annuities With-profits

annuities • Financial risks are

shouldered by participants • Defined-benefit

Pension Funds are allowed for the self-employed only (none exists)

• No financial

guarantee is offered • The legal rate of

return on TFR

contributions is often chosen as a

benchmark

• Defined-benefit Open Pension Funds are allowed (albeit only for the

self-employed) but none exists

• Financial guarantees are offered on some very conservative investment lines, but these have not been very popular,

accounting for about 5% of the market

• Financial guarantees are very rare, with the exception of with-profits annuities

offered within a unit-linked policy

• The policy guarantees a minimum return each year, without averaging favourable past returns with present losses • The maximum rate

which can be guaranteed is 4%, or 60% of the average return on BTP (current ceiling is 3%, but actual guaranteed returns are lower) Turin, 21-22 June, 2002

(23)

b) Annuity pay

-

out phase

•

• all pension plans offer only a with

all pension plans offer only a with

-

profits annuity

with minimum yearly returns during the pay

-

out

phase

•

• it is envisaged that different products could be

it is envisaged that different products could be

created and offered to clients before private

pensions actually begin to be paid

CeRP - 23 Turin, 21-22 June, 2002

(24)

5.6.

5.6. Demographic Risks

Demographic Risks

Occupational

Pension Funds Open PensionFunds Pension PlansIndividual accumulation

phase On participants On participants On participants,except for contracts adopting

a fixed mortality table

decumulation

phase On the insurancecompany On the insurancecompany On the insurancecompany

CeRP - 24 Turin, 21-22 June, 2002

(25)

5.7. PRICING

Occupational

Pension Funds Open Pension Funds Pension Plans Individual mortality

tables Yet to be decided No gender

differentiation?

Mortality table

declared in advance, but changes are

possible any time in the

accumulation phase RG48

Generali 98ps

ISTAT SIM (SIF) 91 projections gender differentiation RG48 gender differentiation technical

interest rates Varying between zero and the maximum allowed by _{the supervisory authority}

CeRP - 25 Turin, 21-22 June, 2002

(26)

5.8. Costs

CeRP - 26

Funds Open Pension Funds Individual Pension Policies (FIP) -based on market

leaders- Simple structure, low costs:

• Entry fee:

Small lump sum (€ 10)

• Annual administrative and management fees:

On average 0.70% of assets

Simple structure, moderate costs:

• Entry fee:

Modest lump sum (€ 10 - 60), waived for group participation

• Possible fixed annual fee: Usually € 15 - 20

• Possible fixed fee for switching investment line or leaving the Fund:

Variable but modest

• Annual management fee: 0.6%-1.5% of assets

Comparable to that of mutual funds and possibly lower.

Often complex structure with poor transparency and very strong front-loading. Generally higher costs: • Loading on premia during the accumulation phase: 1,5%-8.5% but up to 80% on the first premium • Often double management fees (direct and indirect), even totalling more than 4%, though in some cases in line with open pension funds

(27)

6. Comparisons between different

mortality tables

Source: authors’ calculations from insurance companies’ data

CeRP - 27

Actuarially fair annuity cost - open pension funds

10 15 20 25 30 35 50 52 54 56 58 60 62 64 66 68 70 Age An nu it y at 0% RGS "low mortality" projection RG48 mortality table Pension Fund projections

(28)

CeRP - 28

Actuarially fair annuity cost - open pension funds

10 12 14 16 18 20 22 24 50 52 54 56 58 60 62 64 66 68 70 Age A n n u it y at 2. 5% RGS "low mortality" projection RG48 mortality table Generali 1998 P.S. mortality tables Turin, 21-22 June, 2002

(29)

CeRP - 29

Actual annuity cost - open pension funds

10 15 20 25 30 35 50 52 54 56 58 60 62 64 66 68 70 Age A n n u ity at 0%

Actuarially fair annuity based on RGS

projections

Actuarially fair annuity based on RG48

Actual Pension Fund annuity

(30)

CeRP - 30 Turin, 21-22 June, 2002

Actual annuity cost - open pension funds

10 12 14 16 18 20 22 24 50 52 54 56 58 60 62 64 66 68 70 Age A n n u it y at 2. 5 %

projections

(31)

CeRP - 31 Comparison of actuarially fair annuities

open pension funds

0.9 0.95 1 1.05 1.1 1.15 50 52 54 56 58 60 62 64 66 68 70 Age MW R a t 0

% RGS "low mortality"_projection

RG48 mortality table Pension Fund

projections

(32)

CeRP - 32 Comparison of actuarially fair annuities

0.9 0.95 1 1.05 1.1 50 52 54 56 58 60 62 64 66 68 70 Age M W R at 2. 5% RGS "low mortality" projection RG48 mortality table Generali 1998 P.S. mortality tables Turin, 21-22 June, 2002

(33)

CeRP - 33 Comparison of actual annuities

0.9 0.95 1 1.05 1.1 1.15 50 53 56 59 62 65 68 Age M W R at 0%

projections

(34)

CeRP - 34

Comparison of actual annuities open pension funds

0.85 0.9 0.95 1 1.05 1.1 50 52 54 56 58 60 62 64 66 68 70 Age M W R at 2. 5%

projections

(35)

Comments

•

• A few open Pension Funds adopt mortality tables

A few open Pension Funds adopt mortality tables

different from the RG48:

¾

Are some companies taking undue risks in order to

attract customers?

¾

Are the “low mortality” projections calculated by the

Ragioneria Generale dello Stato

Ragioneria Generale dello Stato, which form the basis

, which form the basis

for the RG48 table, overly precautionary?

¾

Is the price differentiation on annuities illusory?

9

9 Companies may change their annuity price at any

Companies may change their annuity price at any

time

9

9 Participants may switch to a plan offering a

Participants may switch to a plan offering a

better annuity price at little or no cost up to the

end of the accumulation phase

CeRP - 35 Turin, 21-22 June, 2002

(36)

Conclusions

¾

¾ Despite all efforts, the Italian annuity market remains an “infaDespite all efforts, the Italian annuity market remains an “infant nt industry”

industry”

¾

¾ On the demand side, little is known of households’ true attitudeOn the demand side, little is known of households’ true attitudes s towards annuities

towards annuities

¾

¾ On the supply side, normative differentiation among schemes are On the supply side, normative differentiation among schemes are not backed by either efficiency or by explicit redistributive go

not backed by either efficiency or by explicit redistributive goalsals ¾

¾ Financial and demographic risks are substantial and unfamiliar tFinancial and demographic risks are substantial and unfamiliar to o Italian households

Italian households

¾

¾ Guarantees Guarantees –– if possible at low costs if possible at low costs –– should be reinforced and should be reinforced and transparency in the individual schemes enhanced

transparency in the individual schemes enhanced

¾

¾ In the next few years, occupational pension funds will “naturallIn the next few years, occupational pension funds will “naturally” y” grow, while the first private pensions will be paid out

grow, while the first private pensions will be paid out

¾

¾ However, the main obstacle to the development remains the high However, the main obstacle to the development remains the high coverage of the public pillar for employees

coverage of the public pillar for employees

¾

¾ Hence, CeRP proposal of introducing a small and gradual Hence, CeRP proposal of introducing a small and gradual opting opting out

out from social securityfrom social security

(37)

Appendix: Data on pension funds in Italy

Occupational funds: adherents

CeRP - 37 851.882 32.475 913.202 96.964 0 200.000 400.000 600.000 800.000 1.000.000 1.200.000 num be r 31.12.2000 31.12.2001 authorized to collect subscriptions authorized to operate

Source: COVIP – Annual Report 2001 Turin, 21-22 June, 2002

(38)

Occupational Funds authorized to operate:

adherents (employees)

CeRP - 38 767,696 2,354,347 898,981 5,852,491 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Employees 2000 Employees 2001 years Potential adherents Adherents

(39)

Occupational Funds authorized to collect

subscriptions: adherents (employees)

CeRP - 39 100,836 7,597,567 95,059 2,312,855 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Employees 2000 Employees 2001 Potential adherents Adherents

(40)

Participants in occupational funds: employees and

self

-

employed

868.532 17.119 994.040 16.126 750.000 800.000 850.000 900.000 950.000 1.000.000 1.050.000 2000 2001 Self-employed Employees CeRP - 40 Source: COVIP – Annual Report 2001

(41)

Occupational funds: annual flows of contribution

38 40 81 91 88 180 179 124 325 333 237 568 0 200 400 600 800 1000 1200 m illions of euro 1998 1999 2000 2001 severance pay (TFR) employer employee CeRP - 41 Source: COVIP – Annual Report 2001

(42)

Occupational funds: annual flows of contribution

(employees and self

-

employed)

38 40 81 91 88 180 179 124 325 333 237 568 0 3 4 7 0 200 400 600 800 1000 1200 millions of euro Employees 1998 Employees 2000 Self-employed 1998 Self-employed 2000 severance pay (TFR) employer worker CeRP - 42 Source: COVIP – Annual Report 2001

(43)

Occupational funds: multi

-

period returns

(1999 - 2001) (2000 - 2001) -2001 N et r etu rn s B enc hm ar k 0,2 4,1 15,6 -0,5 3 14,5 -2 0 2 4 6 8 10 12 14 16 % Net returns Benchmark CeRP - 43 Source: COVIP – Annual Report 2001

(44)

Occupational funds: portfolio allocation

Bonds 73,0% Stocks 18,5% Others 1,6% Mutual funds 0,8% Deposits 6,1% Deposits Bonds Stocks Mutual funds Others CeRP - 44 Source: COVIP – Annual Report 2001

(45)

Open funds: adherents

201.771 21.261 254.531 32.720 0 50.000 100.000 150.000 200.000 250.000 300.000 Number 2000 2001 Collective agreements Individual subscriptions CeRP - 45 Source: COVIP – Annual Report 2001

(46)

Open funds: adherents’ distribution by category

22,080 67,356 85,198 4,684 43,491 38,779 74,111 117,198 2,585 54,578 0 50,000 100,000 150,000 200,000 250,000 300,000 Number 2000 2001 Others

Members of and associated to co-operatives

Professionals Self-employed Employees

CeRP - 46 Source: COVIP – Annual Report 2001

(47)

Open funds: flows of contribution

2000 2001 Employees Self-employed 195 251 50 90 0 50 100 150 200 250 300 Millions of euro Employees Self-employed CeRP - 47 Source: COVIP – Annual Report 2001

(48)

Open funds: multi

-

period returns

(1999 - 2001) (2000 - 2001) -2001 Ne t r et ur ns B en chm ar k -6.1 -5.6 11.1 -5.6 -2.8 20.4 -10 -5 0 5 10 15 20 25 % Net returns Benchmark CeRP - 48 Source: COVIP – Annual Report 2001

(49)

Open funds: portfolio allocation

Deposits 6,0% Mutual funds 30,4% Stocks 31,9% Bonds 31,1% Others 0,5% Deposits Bonds Stocks Mutual funds Others CeRP - 49 Source: COVIP – Annual Report 2001

(50)

Occupational and open funds: annual flows of

contribution

159 1,144 632 362 341 17 149 245 0 200 400 600 800 1,000 1,200 1,400 1998 1999 2000 2001 years m illio n s o f e u ro Occupational Open CeRP - 50 Source: COVIP – Annual Report 2001

(51)

Occupational and open funds : net assets

943 2,256 1,190 544 165 17 234 552 0 500 1,000 1,500 2,000 2,500 1998 1999 2000 2001 years m ill io n s o f eu ro Occupational Open CeRP - 51 Source: COVIP – Annual Report 2001

(52)

Individual pension schemes: adherents

CeRP - 52 201.771 219.265 190.000 195.000 200.000 205.000 210.000 215.000 220.000 2001

Open funds- individual participation

Insurance policies

(53)

Insurance policies: collected premiums

Source: COVIP – Annual Report 2001 CeRP - 53

144 212 0 50 100 150 200 250 milions of euro 2001 With-profits annuities Unit linked policies