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Austria needs pension simplification not guarantees, experts warn

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  • Austria needs pension simplification not guarantees, experts warn

AUSTRIA - More guarantees in Austria's second pillar would serve only to complicate the system and fuel public doubts, according to advisory and academic experts.

Thomas Kassler, occupational pensions managing director at the new consultancy group Koban, told a press conference in Vienna on Wednesday that current reform discussions around the re-introduction of guarantees in Pensionskassen were headed in the wrong direction. His views received support from independent academic expert Wolfgang Mazal.

"We already have an occupational pension vehicle with guarantees - the insurance-based BKV - so people should get free choice between the two vehicles according to their risk profile," Kassler said.

Separately, Kassler told IPE that additional choices, such as Pensionskassen with life-cycle models, were serving only to confuse people. He added that such rigid models were, in any case, not suitable for everybody.

Mazal, professor for social and labour law at the University of Vienna, lent support to Kassler's comments, stating: "Simplification is the key to strengthening peoples' trust in the system".

Mazal said current debates concerning a return to a mandatory system in Austria were counterintuitive, as "we already have a mandatory system", referring to the BVK severance pay funds employers are required to contribute to.(see earlier IPE-story: Valida argues for mandatory second pillar)

"We have made the systemic step to introduce a mandatory system but we are not calling it that - there is a lot of political dancing around the issue but not saying it out loud," he said.

That said, the BVK severance pay funds are not intended as retirement provision vehicles, and Kassler suggested that individuals should transfer their money from BVK funds into their Pensionskassen, arguing that BVK guarantees on capital would not help people in an inflationary environment. Koban would also like to see more tax incentives and flexibility for contributions in the system.

Mazal also said Austria did not need to raise the level of the second pillar to that of other countries, because "the first pillar is much more sustainable". Consequently, he saw the second pillar as having the potential to act as something akin to a "bridging income", which could be used by individuals, for example, who were working part-time before retiring in a bid to increase their state pension through higher pre-retirement contributions.

 

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