Listed companies still 'major part' of Austrian pension system, says Arithmetica
AUSTRIA - The unfunded pension reserves of Austrian listed companies weathered the financial crisis well and will remain a major part of the country's pension system, according to Christoph Krischanitz, chief executive of Austrian consultancy Arithmetica.
The defined benefit obligations (DBOs) of the 58 companies in the Viennese stock market's top segment - the ATX Prime - amounted to €6bn last year, a slight decrease from 2008 (€6.1bn) due to a reduction in the number of employees and lower-than-expected salary increases.
Of those total DBOs, €4.1bn are kept on the books, while €1.7bn are outsourced to Pensionskassen or, to a much smaller degree, the insurance-based second-pillar vehicle BKV (Betriebliche Kollektivversicherung).
On average, companies paid 5.37% interest on their pension reserves in 2009.
Krischanitz said there was "no need to worry" about book reserves, as the DBOs only made up between 1% and 9% of the companies' asset base.
For the country as a whole, including non-listed SMEs, between €20bn and €30bn in DBOs remain on the books, while €18bn are outsourced to Pensionskassen and BKV.
This makes companies the second-largest pension provider in Austria after the state.
Krischanitz said: "That will not really change because a lot of the existing liabilities are pensioner's assets, and they are difficult to outsource, as this would have to be done on an individual basis."
He added that growth potential for the funded second pillar would come from new companies and might increase with proposed changes to the IAS19 accounting standards.
"It has to be expected that the corridor, which can be used as buffer in strong market turbulence, will become a thing of the past within the next two to three years - and Austrian companies are preparing for it by narrowing the corridor," Krischanitz said.
"If companies can no longer use this accounting tool, market movements will fully affect their pension reserves, and they might consider outsourcing them."
The OECD has released figures showing Austria has the second-most expensive state pension system in Europe after Italy, with costs 50% higher than the EU average.
These statistics have sparked a debate on a pension reform, with most parties and industry representatives calling for incentives to increase the actual retirement age, which is currently five to seven years before the statutory retirement age of 65 years for men and 60 for women.
Some parties are also demanding the introduction of individual accounts in the first pillar.