AUSTRIA – The PKG-Novelle – Austria’s latest reform of the law governing Pensionskassen – was the “best possible solution” within the existing system, but more reform is needed at the European level, according to Peter Braumüller, head of the insurance and Pensionskassen division at supervisor FMA.

Austria’s Parliament approved the PKG-Novelle, which allows greater individual choice for members of Pensionskassen and a safety option for people close to retirement – last year.

“With the reform, the most important steps were taken to iron out the biggest bumps within the system,” Braumüller said.

“It was the best possible solution within the existing system without a complete systemic reform.”

He conceded that “some problems remained” but said those would have to be answered “on a political level”.

Braumüller was referring to old defined contribution contracts from the 1990s, for which a discount rate of around 6% was applied, causing frequent cuts in pension benefits.

He welcomed the greater choice for individuals introduced by the reform.

He also said the safety pension ensured “the amount of money you got on the day of your retirement was less a matter of luck”, as it offered a guaranteed minimum initial pension payout independent of the market situation on the day of retirement.

However, Braumüller stressed that there should not be any “further individualisation” within the system, as “the concept of a collective second pillar system has to remain intact”.

The insurance expert explained this was necessary for balancing out actuarial and investment risks within the system.

Braumüller, who was re-elected to EIOPA’s management board at the end of June and has a seat on the IAIS board, sees current regulations at the national and international levels as “adequate”.

But he acknowledged that, “at times, recommendations threaten to overshoot their targets”.

He added: “A complex system such as pensions cannot be supervised with simple regulations.”

As for the IORP II Directive, he noted Austrian Pensionskassen would “not have to adjust much”, considering the current draft excluding capital requirements.

However, “over the long term”, Braumüller said he would like to see some form of quantitative regulatory requirements for pension funds similar to those for insurers, “but not the same”.

“We need to prevent arbitrage between the systems and make them more comparable,” he said.