AUSTRIA - Austrian unions have voiced their support of fair-finance - the newest provider of severance-pay funds - in its bid to increase competition in the market.
Since 2003, each employer has had to pay into a severance-pay fund for new employees. The same institutions that run Pensionskassen mostly offer these funds.
But last year, fair-finance entered the market, co-owned by founder Markus Zeilinger, former head of Bonus Pensionskasse, private shareholders, GLS Bank and the oeco capital insurance company.
Zeilinger said he wanted to see an evaluation of severance-pay funds included in a pending amendment of the legal framework.
“Currently, employers are not really thinking about the issue of a severance pay fund,” he said. “They made a decision several years ago and put the topic out of their minds.”
Together with unions and the labour chamber (AK), Zeilinger has called for a regular evaluation of the fund every 10 years as part of the due diligence for employers and worker representatives at companies.
He also said he would like to see people’s assets spread over various funds being pooled.
At the moment, people changing jobs keep an account at their former employer’s severance-pay fund and open a new one with their new employer.
“Some people already have five accounts and more,” Zeilinger said.
He wants the default to be a transfer to the newest fund at the end of the year, with an opt-out option for people who want to diversify their holdings, or are unhappy with the new severance-pay fund.
“Our competitors do not like this suggestion, but it would only mean an initial cost increase to coordinate these transfers,” Zeilinger said.
He added that this measure would eventually help save money, as most of the inquiries funds have to deal with are people asking whether or not they have an account at a certain fund, or how they can transfer the money.
Another issue discussed prior to the amendment is an increase of the 1.5% contribution made by the employer to 2.5%.
Zeilinger said the current contribution rate was calculated assuming an average 6% return, while in fact the average return is much closer to 3%.
“At the moment, Vorsorgekasse (provision fund) is the wrong name for these funds,” Zeilinger said, adding that they are not supplementary provision funds in their current form.