AUSTRIA – The country’s employers association and unions have come up with a defined contribution (DC) pensions system designed to modernise the Austrian retirement benefit and provisions’ landscape, says Vienna based Actuaria Benefit Consulting.
The new proposal, which will apply to all new working contracts from June next year, is a mixture of a severance payment fund and pension fund and will be invested via Abfertigungskassen, into which employers will make a basic contribution of 1.53% of an employee’s salary.
Employees may take the accrued assets in cash if they decide to leave their company or are laid off for various reasons, or transfer the assets to the Abfertigungskasse of their new job, allowing greater flexibility than under the existing system. Alternatively, employees that stay with one company until they retire may opt to take their accrued assets in cash or as an annuity, including a spouse’s pension.
The existing system is a mixture of a severance payment and mandatory ‘golden handshake’, whereby employees receive one off additional pensions payments if laid off for various reasons or die, but don’t receive anything if they leave a company of their own accord.
The new system has been devised in line with the changing working environment in Austria, where it is now common for people to change jobs during their working life.
“In the past, people generally stayed in one job for all their working life, but things are different now and that’s why an amendment to the existing laws is now necessary,” says Actuaria’s Thomas Keplinger.
Keplinger points out that the new Abfertigungskassen are both tax free and excluded from the assessment basis for social security contributions, although some modifications to their structure are likely to be suggested by the government before they become law.
Furthermore, the new system eases companies’ accounting obligations, since the fact that the Abfertigungskassen are pure DC vehicles means that companies won’t have to have internal book reserves to finance payments, something that is mandatory under the current system.