Austria’s goverment has for the pledged a more holistic approach to pension reform and announced that the statutory pension commission will soon examine all three pillars of its pension system before deciding on necessary adjustments and reform measures.
To date, the Pensionskommission – consisting of civil servants, experts and politicians and established in 2000 – has only ever examined the country’s first pillar.
Its proposals have so far included changes to the calculation of pension payouts – such as an end to payments being based on the 15 best years of workers’ earnings – increasing the statutory retirement age or tackling hurdles to early retirement and invalidity pensions.
However, in 2013 the current coalition government consisting of Austria’s two main parties, the conservatives ÖVP and the social democrats SPÖ, vowed that future pension reform would take all three pillars into consideration.
The commission will begin its work this autumn, with first reform proposals expected for end-February next year.
Andreas Zakostelsky, chairman of the Austrian pension fund association (FVPK) and an ÖVP member of of the lower chamber of parliament, welcomed the scheduled talks in which representatives of the second and third pillar will also be included.
At a press conference, he stressed it was important to increase participation rates in the second pillar, as 75% of Austrians still had no supplementary employer-provided pension.
The FVPK will call for changes to the tax treatment of contributions made by employees to pension plans – both Pensionskassen and the insurance-vehicle BKV.
For one, the FVPK wishes Austria to finally introduce the EET system in place in most European countries, which exempts contributions, investment income and capital gains from tax.
The change would mean that not only employer contributions, but also those paid by employees would be tax exempt until the pension payout phase is reached.
In addition, Zakostelsky proposed at the press conference to make the second pillar more comparable to the third pillar by introducing the same state subsidies up to the same threshold of savings.
To boost participation in the second pillar, the FVPK will also suggest integrating pension saving more closely into industry-wide collective bargaining agreements.
This would mean – unlike the Dutch-style approach proposed for Germany – that each employer would still have to set up its own pension contract with a provider or create its own pension fund.
Zakostelsky noted that the reform talks scheduled for the coming months did not include representatives of Austria’s mandatory provident funds, or Vorsorgekassen, but said that over the long term it would “make sense to consider these in talks about retirement provision as well”.
In total, the 14 Austrian Pensionskassen were managing just over €20.5bn at the end of June, with a half-year performance of 4.34%.
The market has recently seen several funds merge. It is not yet known whether the sale of the Victoria-Volksbanken Pensionskasse (VVPK) to pension provider Bonus will see the company continue to run the two funds as standalone entities, or merge them into one.