Austrian pension reform a boost for tax - IMF
AUSTRIA – The International Monetary Fund says Austria’s recent pension reform will boost the country’s long-term fiscal sustainability.
“The recent reform makes an important contribution toward long-term fiscal sustainability,” the IMF said in a country report.
“Moreover the reform will help raise labour force participation of the elderly, thus lowering the fiscal burden of the pension system even further, though its impact in this area is more uncertain.”
The reform is expected to eliminate more than one third, or 1.5 percentage points of gross domestic product, of the projected rise in the pension system deficit over the long term.
This year the Austrian government made a series of major changes to the Allgemeines Sozialversicherungsgetz, the largest public scheme which covers around 75% of workers.
The changes saw early retirement being phased out during 2004-17 by a raising of the early retirement age to 65, a reduced accrual rate and a higher bonus for late retirement.
“The Austrian reform compares favourably with similar recent initiatives in other European countries,” it added.
But the IMF said there would be a number of “undesirable effects” of the reform’s 10% cap on benefit losses – for example, severing the notional link between contributions and benefits.
“This cap should be revisited with a view to minimizing its undesirable effects while, at the same time, providing a cushion especially for low-income pensioners”.
The IMF said it was told by the Austrian authorities that they intend to slowly phase in the harmonisation of the various public pension schemes as it is a politically and technically complicated issue.
“To cement the gains from the recent reform, the government should deliver on its commitment to harmonise the various pension schemes with a view to reducing inequalities and distortions between schemes,” the IMF observed.