Returns drop sharply in 2011 for Austria's severance pay funds
AUSTRIA - Returns for Austria’s severance pay funds, or Vorsorgekassen, have dropped sharply year on year to just 0.24%.
In 2010, funds in the mandatory system returned 2.58% on average, close to the 2.62% annualised average since they were created in 2004.
Last year, however, returns dropped to just 0.24%, according to preliminary figures issued by the Association of Vorsorgekassen.
Final figures for individual funds have not yet been released, but Georg Dax, a board member at Valida Plus - the severance pay fund provided by Valida (formerly ÖPAG) - told IPE his fund’s performance was somewhere near 1.7% for 2011.
In general, many severance funds’ returns have been hit by large bond allocations (more than 85% on average) - widely used to meet legal capital-guarantee requirements.
Currently, just 10% of the overall €4.3bn invested in severance funds has been allocated to equities.
The funds must also contend with the possibility of losing around half of their members, which can legally withdraw after three years.
Severance pay funds have long wanted to revise Vorsorgekassen to allow for greater retirement provision, but Anna Ritzberger-Moser, a severance pay expert at the Social Ministry, said the government currently had no major plans for system reform.
“There is no major reform of the system under discussion, and the amendments planned for this year are merely technical ones addressing minor organisational issues,” she said.
She also argued that allowing Vorsorgekassen to act as both severance pay funds and retirement providers would be problematic.
At a symposium in Vienna on severance pay, sponsored by Valida, Günther Löschnigg, a professor of law at the universities of Linz and Graz, was highly critical of the fact the system was mandatory, which “must be questioned in light of [their] performance”.
Regarding some industry representatives’ calls to allow employees to pay into the funds alongside their employers, Monika Drs, occupational pensions expert at Vienna’s University of Economics, claimed this would entail a major system change.
She also argued that too few members would take advantage of the change, considering the numbers currently making contributions into Pensionskassen.