AUSTRIA - Calculations used by the Austrian government for the projection and reform of the pension system's future expenses might be too optimistic, the International Monetary Fund (IMF) has suggested.

In a report on the Austrian economy, the IMF said worst case scenario, pension expenditure could rise to 18% of the GDP by 2050 compared to the 12.25% projected by Austrian authorities.

Pension spending in Austria is currently among the highest in Europe, accounting for 14% of the GDP in 2004 compared with the EU-15 average of just over 12%.

Over the last seven years, the government has taken various measures to cut pension spending, cut down on early retirement and strengthen supplementary pension provision.

While these measures have been welcomed by the IMF, the organisation argued pension calculations were based on quite optimistic assumptions regarding migration, fertility and decreasing early retirement quota all of which have "significant uncertainty margins".

The new government, which took office at the start of this year, has already made several suggestions as to how to strengthen the second pillar which was introduced in 1990.

One of these might be to increase employee profit share with the money going into a pension fund.

However, reacting to union fears this policy might lead to cuts in the state pension provision, the government stresses second and third pillar pensions "can only be a sensible addition to but never a replacement for payments from the first pillar".

A government spokesman explained to IPE it was only possible within the first pillar to include years in which a person stayed home to look after children, or years of joblessness into the calculation of pension benefits to achieve social justice.

He also said second-pillar pensions increase costs for employers and employees. "Therefore, a widespread occupational pension provision can only be established if we accept higher labour costs."

Self-employed people are currently not covered under the second pillar retirement provisions. However, Austrian Pensionskassen (the bodies that administers second pillar pension money) has announced plans to start a campaign in the autumn to drive the self-employed to second-pillar occupational pension rights.