AUSTRIA - Current plans to reform Austria's "fragmented" pensions system are a "mistake", according to Allianz board member Manfred Baumgartl.
During a discussion on the future of retirement provision, Baumgartl criticised the country's "very confusing" supplementary pension sector.
He estimated that €50bn had been invested in traditional life insurance products, €14bn in unit-linked life insurance, almost €15bn in Pensionskassen, €5bn in state-subsidised private retirement provision (Zukunftsvorsorge) and €3bn in severance funds (Vorsorgekassen).
"This is a hodgepodge of funded pension schemes that is too fragmented and none of which, apart from the life insurance, was created with the main aim to offer an effective retirement provision," he said.
Baumgartl pointed out that Austrian Pensionskassen had been established to ease the burden of pension liabilities on large companies, that the Zukunftsvorsorge had been set up - including a mandatory 40% domestic equity quota - to support the domestic stock exchange and that the Vorsorgekassen had been created to get severance pay reserves off companies' books.
He even went on to suggest that the investment set-up for Vorsorgekassen and Zukunftsvorsorge "violated" the prudent person principle, as the former had to generate long-term returns while having to pay out funds on demand, while the latter had to offer guarantees on a 40% equity quota.
Baumgartl also reiterated that the insurance industry had not won Pensionskassen business when it was established in the early 1990s because insurance companies offered discount rates that were "too low", which would have meant higher transfer payments for Austrian companies.
But Andreas Schieder, undersecretary to the finance ministry, argued that it would be "impossible" to transfer assets from these various vehicles, each having its own unique history.
In fact, he predicted an ever-wider spectrum of vehicles in future, but said he feared that many people would not have enough money left by then to be thinking about saving for retirement.
He added that "just because [the Austrian pensions system] is a hodgepodge doesn't mean it isn't reliable".
But Allianz's Baumgartl called for a master plan, "rather than putting up pots here and there".
Although he conceded that past mistakes "could not be undone", he said it "might be an idea not to make new mistakes such as implementing a Pensionskassen reform that is altering the system to the worse".
He also argued that the so-called 'safety pension option' (Sicherheits-VRG) - to be introduced under the amendment to the law governing Pensionskassen - was a "bogus claim" without real value.
He said the additional choices offered to members would simply confuse them, rather than add value.