The Italian cabinet approved on Thursday a long-delayed reform intended to boost private pension funds and take the strain off the creaking state system.
The reform will come into effect in January 2008, two years later than planned, to give Italian companies time to plan for the changes, Economy Minister Giulio Tremonti told reporters.
"I think this is a great reform, one of the best in all of Europe," he said after a cabinet meeting.
The reform aims to launch a second pillar of private and occupational schemes to flank state pensions, using money which companies currently hold on behalf of their workers in a fund (TFR) which employees receive when they leave their job.
It will come into force at the same time as a reform of the state pension system which raises the retirement age to 60 from 57. Both measures could be changed or scrapped between now and 2008 by whoever wins the 2006 general election.
Thursday's accord, which does not need to be ratified by parliament, disappointed insurance firms.