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Austrian study blames pension funds for the financial crisis

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AUSTRIA/GLOBAL - The growth of funded pension systems over recent decades has destabilised the equity markets, a new study commissioned by the Viennese Labour Chamber (AK Wien) had concluded.

The organisation concerned with workers' welfare is already one of the major critics of the Austrian pensionskassen system, but this latest attack on behalf of AK Wien by researcher Agnes Streissler concluded the "privatisation of the pension systems has contributed to the financial crisis and the increase of volatility". (See earlier IPE story: Austrian pensions system 'riskiest' by comparison

In the latest study, Streissler - a former AK employee - analysed the US, Swedish and Austrian pension systems.

She also cited figures from the OECD's private pension outlook 2008 which showed the average returns from Swedish mandatory pensions have decreased from 6.2% annually between 1988 to 2005 to 1% between 2000 and 2005.

Streissler concluded that the increase in investments by pension funds over that time has led to more "short-term thinking" among companies to please their shareholders.

She argued the issue was pension funds had promised too high returns in the range of double-digit growth.

In turn, the holes in pension plans has left companies with additional financial burdens which can have a negative effect on their debt ratings, she argued.

While Streissler admitted that the crisis in the economy is also affecting pay-as-you-go schemes, she argued "the risk that assets are devalued from one moment to the next, leaving retirement protection insufficiently covered, is only to be found in funded systems".

Earlier this year, the Mannheim Research Institute for the Economics of Ageing (MEA) at the university of Mannheim in Germany released a study on the effects of the financial crisis on PAYG plans.

In it the researchers claimed guaranteed pensions from a state system helped retirees but burdened younger generations more.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

 

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