Austria unveils revised pension fund law after protracted negotiations
EUROPE - After nearly two years of talks, Austria has produced a revised law on Pensionskassen that looks to give individual members more options but could increase administrative and regulatory demands.
Negotiations started in 2009 by the government, the social partners, Pensionskassen and insurance-based second-pillar schemes (BKV) have now resulted in an amendment to the Austrian law on Pensionskassen, which can be reviewed until 10 January 2012.
True to the original plan, the revised draft contains a so-called "security pension" option, with a lower discount rate where the initial pension payment is guaranteed.
Further, people will be able to opt into a life-cycle model, or transfer over to an insurance-based BKV.
The revised legal framework will also allow companies to vary their annual contributions much more than before.
Stefan Eberhartinger, head of the Siemens Pensionskasse, said the new law would undermine the collective nature of occupational pensions and "turn it into an individualised pension under an occupational roof".
He fears a massive increase in administrative costs and regulatory requirements that might hit multi-employer Pensionskassen like his.
Eberhartinger also predicted the revised law would lead to consolidation in the second pillar, particularly because of new regulations on portfolios within a pension fund.
Under current Austrian law, Pensionskassen can offer a company with more than 1,000 employees its own "pool" within the fund, the so-called Veranlagungs- und Risikogemeinschaft (VRG).
A VRG is an investment and risk collective in which companies can have a say with regards to risk-taking, among other things.
According to the amendment, this threshold will be upped to 10,000 in multi-employer funds to reduce the number of VRG within the Pensionskassen.
Currently, there are around 130 VRGs in the 17 Pensionskassen, with the largest, VBV, running more than 40.
Even existing contracts will have to be re-organised under these new rules by 2014, with the only exception being contracts where the employer has signed an unlimited obligation to provide further contributions if necessary.
In effect, smaller pension funds will then only be able to offer two or three pools with different risk profiles, which might make larger funds with more choice more attractive for companies.
Other amendments proposed include the reduction of the vesting period from five years to three, the right for the supervisor to set minimum buffer requirements and the application of the legally capped discount rate (Rechnungszins) for new entries into existing company contracts should the discount rate used there be higher.
In a statement, the Austrian Finance Ministry noted that these measures would increase Austrian Pensionskassen's competitiveness in the medium term and lead to more companies signing second-pillar contracts.