Austrian workers could soon have their special employment severance payments invested in a quasi pension funding system, if plans put forward by Austrian employment associations and the OPP Austrian Peoples Party to abolish their current balance sheet status, are implemented by the Austrian government.

The proposal to fund the lump sum payments, which are handed out upon retirement and commensurate with a maximum of one year's salary, is being put forward in a bid to update and bolster the current outmoded system.

Supporters argue that it will also guarantee higher pay outs for retirees.

Johannes Martinek, a director of the board at the Vienna based Vereinigtes Pensionskasse (VP), explains: The current book reserve system is antique and impractical, and we think a pension plan investment type arrangement would guarantee both the safety of this money, whilst increasing the amount retirees receive in their hand."

Martinek says the current discussion between Austrian social partners and the OPP, which has six goverment ministers, is whether this money should be run by existing pension funds or new fund organisations. The groups are also seeking to ensure that any change should not lead to dissipation of present pension fund levels.

"We feel the severance payments would be best managed by existing pension funds or life insurers, because of their experience and the greater returns possible through larger funds.

"Hundreds of smaller institutions would be difficult to manage and regulate. The essential thing is that this move is not seen in any way as a reduction to true pension funding - it is still a severance top-up," Martinek adds.

The proposals are expected to play a major part in debate ahead of Austrian government elections next year.

Walter Pancsits, secretary general of the OAB, the social and employment arm of the OPP, which represents over a million Austrian workers, said: " Of course this is a very political question, but we believe that sense will prevail whoever wins the election next year, and this funded system will be brought in within three years.""