Austria’s nine second pillar pension funds posted an average loss of 5.3% in 2018.

National pension fund association FVPK blamed “high volatility” on the capital markets for the considerable losses – “particularly in the fourth quarter”.

At the end of September, the five multi-employer pension funds – which manage the majority of the €22bn in the Austrian second pillar system – had posted an average loss of 1.1% for the first nine months of 2018.

In a newsletter, the FVPK highlighted that the average performance since inception of the occupational pension pillar 28 years ago was at 5.2% a year, despite the 2018 losses. The funds gained an average 6.1% in 2017.

Andreas Zakostelsky, chairman of the pension fund association, said the long-term results proved that it made sense to invest in the capital markets for supplementary pension income.

Good years also allowed Austrian pension funds to build buffers, which were used to cushion cuts to pension payouts in defined contribution funds.

The extent of the cuts depends on the contract a company signed with a pension fund and how well its buffers are filled. One pensioners’ rights group has warned of a 16% cut for some higher-earning pensioners.

Austria’s largest pension fund, the €6.7bn VBV, lost 5.5% last year after a 7.4% gain in 2017.

Günther Schiendl, board member at the VBV, said equities was not the only asset class that made a negative contribution to performance.

“At the end of last year all relevant, investable asset classes had a considerable negative performance – including money-market funds,” he said.

He also noted the extreme volatility on the US stock exchanges, especially in the last trading days of 2018 when share price declines “were the worst since the 1930s”.