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Amendment to Austrian pensions law clears first hurdle

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  • Amendment to Austrian pensions law clears first hurdle

AUSTRIA - The Austrian pensions industry said it did not expect any further changes after the government passed it long-awaited pensions reform.

Discussions on amending the Pensionskassengesetz (PKG) - and problems concerning high discount rates applied to contracts made in the early 1990s when the system was first set up - began three years ago in the wake of the financial crisis.

Austria's council of ministers has now approved the draft amendment, which will be forwarded to parliament, where it could be passed as soon as mid-May.

Industry representatives did not expect any further changes to be made during the parliamentary readings and said they were confident the law would go into effect before the summer.

Andreas Zakostelsky, chairman of the Austrian pension fund association FVPK, told IPE the law was an "important socio-political step for all Austrians", as it made the second pillar "more attractive" through increased flexibility and choices both for employers and employees.

Only recently, this flexibility was characterised by Allianz board member Manfred Baumgartl as a "mistake".

But Zakostelsky said the new provisions, including the so-called 'safety pension', were a "good basis to further increase membership in the second pillar" and welcomed the fact the amendment was now supported by all social partners.

"These are positive changes for our clients, as well as prospective clients, and therefore they are positive for our business," he said, adding that the reform was worth the additional costs. 

He confirmed that the draft bill remained virtually unchanged compared with the last published draft in November 2011, apart from one point - the increase of the minimum size of a portfolio within a Pensionskasse from 1,000 to 10,000 members was reversed.

The increase would have spelled doom for many smaller multi-employer funds, which would have been forced to offer members just one or perhaps two risk-profile choices, rendering them uncompetitive.

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