Austrian funds increase equity allocation in Q1
AUSTRIA - Official figures for the first quarter performance show a significant increase in the equity holdings of Austrian pensionskassen, which are the subject of further reform proposals.
The figures collected by the Austrian Control Bank (ÖKB), a bank-owned financial service provider, confirm preliminary results of an average 2.93% investment performance for pensionskassen in the first quarter. (See earlier IPE article: Austrian funds return 3% in Q1)
While multi-employer funds averaged a 2.87% return, company pension funds fared a little better at 3.34%. The average asset allocation at the end of the first three months was 33.6% equities, 63% bonds, 2.5% in real estate and the rest in alternatives and/or cash.
Compared to year-end 2009 this is an increase on equity holdings by 10 percentage points despite the average equity market reporting only a slightly positive return for the same period.
It can be concluded that the increase was down to an active hike in equities after last year’s market rally.
The increase was much more pronounced within multi-employer funds, which traditionally have a lower equity exposure, especially in the non-European equity sector. Company pensionskassen, on the other hand, decreased their exposure to non-European equities and increased their share of European equities instead.
Meanwhile the pension secretaries of the two major political parties have joined forces with Austria’s largest pensionskasse, the VBV, to propose changes to the system which would ease the burden on pensioners and which they hope would end the stalemate in discussions on a reform of the second pillar. (See earlier IPE article: Austria needs pension simplification not guarantees, experts warn)
As the Austrian system is mostly a pure DC scheme, cuts to pension pay-outs can happen in market dips and as pensioners are carrying some of the risk, their political representatives as well as the VBV are now demanding the right to include pensioners on supervisory boards and pensionskassen committees.
Another demand is for pensionskassen not to take a share of the returns on pensioners’ assets to fill up buffers unless their portfolio has yielded more than the discount rate over the last year, or their pension is still as high as it was when they retired.
Regarding taxation the VBV and the pensioners’ representatives would also like to see pension pay-outs be made tax free and instead collect half the tax on pension assets upon retirement.