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Austrian pension funds return 9%

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AUSTRIA - The average return of Austria's 17 Pensionskassen was 9% in 2009, the pension fund association FVPK has revealed.

Depending on the risk taken within the various portfolios of a Pensionskasse, the returns ranged from "low one-digit to high double-digit figures" while some portfolios with high equity exposure returned over 20%, explained Christian Böhm, FVPK-head.

"But within these portfolios the members need to be prepared to risk losses in bad times in order to get such good returns - and people who are willing to accept this are few in Austria," he added.

On the whole, he noted, Pensionskassen defied the critics who wanted the funds to get rid of all equity holdings at the beginning of 2009.

The average return over the last 18 years since the funds' inception is now 5.9%.

Assets under management grew from €12.4bn to €13.8bn over the last year but the growth in members and with it the future growth in assets was much more significant.

Approximately 210,000 new members joined various Pensionskassen in 2009. That said, most of that growth was down to two major public contracts, with almost 150,000 federal employees, which joined the Bundespensionskasse (BPK). (See earlier IPE story: 150,000 to join BPK)

Another major client is the city of Vienna which has signed a Pensionskassen-contract for around 60,000 of its employees. The contract was divided between the VBV and the ÖPAG Pensionskasse. (See earlier IPE story: Austrian bodies call for 2nd pillar tax incentives)

As for Austrian pension reform progress, Böhm noted there were no known dates yet but there was "broad consensus" on certain issues including the introduction of a guaranteed pension option, lower discount rates for those entering existing contracts with higher discount rates, and the prospect of allowing Pensionskassen to use the held-to-maturity value rather than the market value of high-rated corporate bonds.

"Although this will not mean much difference in performance over the long-term, it will allow us to get more stability and less volatility in certain portfolios, especially in those with many retired people," Böhm explained.

He said it would also allow funds to include more corporate bonds in their portfolios, which was especially important in years like the current one when government bonds are not seen as a good investment option.

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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