Austria’s next government should prioritise strengthening its second pillar pension provision, according to Mercer.
In a report into the first half performance of Austrian Pensionskassen, the consultancy firm referred to recent reforms in Germany, introducing non-guaranteed, defined contribution pensions for the first time.
“In Germany the political parties have realised that a supplementary pension in the form of occupational pension plans is necessary for the future retirement provision of the citizens,” said Michaela Plank, pension expert at Mercer Austria, referring to the newly passed “Betriebsrentenstärkungsgesetz” (BRSG).
The Austrian minister for labour and social affairs, Alois Stöger from the Social Democrats, told Austrian radio Ö1 on Monday he would be “generally open to the idea” of integrating provisions for second pillar plans into collective bargaining agreements – the first time a minister has mentioned this possibility.
“This could help [small and medium-sized businesses] to set up pension plans,” added Plank.
Andreas Zakostelsky, chairman of the Austrian pension fund association FVPK, said he supported integrating auto-enrolment into some of pension plans.
“This would particularly help people with lower income to increase their income in retirement and it would be a good leverage for the system,” he said.
The FVPK wanted the new government to set a deadline for coming up with a plan to strengthen the second pillar, Zakostelsky added. Austria heads to the polls for a general election on 15 October.
“This plan should be negotiated with stakeholders for the pension industry to achieve a comprehensive reform of the whole pension system,” he said.
Equity allocations boost returns in H1 2017
Austrian pension funds returned 3.2% on average over the first half of 2017 following an active increase in equity allocations, according to FVPK.
At the end of June, the average equity allocation stood at 34.7% across all portfolios offered by Austria’s nine main providers. This compared to 25.4% at the same point last year.
“For this increase the pension funds cut the exposure to bonds, which is now 58% on average compared to 68.2%,” Zakostelsky told journalists yesterday.
He added that he was “surprised” the exposure to real estate had hardly changed at all over the period, standing at 3.6% compared to 3.5% a year ago.
In its separate analysis, Mercer Austria found there was a wide range in the performances reported by different portfolios.
Defensive portfolios – with equity exposure up to 16% – yielded between 2.63% and 0.98%. The €6.35bn VBV Pensionskasse was the best performer in this category, according to Mercer. The company’s dynamic portfolio also posted the best six-month return among its peers.
Dynamic portfolios – with equity exposure above 40% – yielded between 5.51% and 2.27% in the first half of the year.
“The considerable difference in the performance is mainly down to differences in volatility and duration,” said Mercer’s Plank.