The Pensionskassen in Austria recorded returns of 7.54% in 2021, above the expectations set at the beginning of the year, according to the Fachverband der Pensions- und Vorsorgekassen (see box below), the new association established to represent the interests of pension and provident funds.
A broad diversification strategy and particularly the performance of equity and real estate investments have made a significant contribution to the positive results last year, up from 2.55% the prior year.
Allocations to bonds, instead, hardly made any positive contribution to returns in 2021, whereas the shift from government bonds carrying negative interest rates to corporate bonds was important for the performance of Pensionskassen, it said.
Last year’s results bring the average performance of Pensionskasssen to 5.06% over a 10-year period.
“This means that the second pillar of the pension system remains a stable form of investment” to pay pension benefits and returns last year are a good result “especially in times of high inflation and uncertainty in financial markets due to the [COVID-19] pandemic [..] the Pensionskassen build up assets over the long-term,” said Andreas Zakostelsky, chair of the Fachverband.
The provident funds – Vorsorgekassen – recorded a 4.04% return with a very conservative investment strategy last year. Their average performance in the long-term is 2.5%.
The reform of the new severance pay system means that all employees have been benefiting from this investment strategy for years, whereas previously only around 15% of workers received a severance pay at the end of their employment relationship.
The eight Vorsorgekassen managed assets for €16.5bn at the end of 2021.
Funded pensions in turbulent times
Austria has been going through turbulent times, changing three Chancellors in sixty days, after Sebasting Kurz left under suspicion of corruption for Alexander Schallenberg. Then Karl Nehammer succeeded Schallenberg in December.
The Fachverband is calling on the current government to finally tackle the issue of pensions this year to expand funded pension provisions and in turn give a boost to the economy.
Therefore it continues to ask for the implementation of the general pension fund contract, or General Pensionskassenvertrag, a tax-deductible transfer of employees’ severance payments to a Pensionskasse to receive a lifelong supplementary pension.
In addition, the association is also calling for employees’ contributions to be made tax-deductible and to set up a premium model for low-wage earners.
Austrian pension funds merge interests
Austrian Pensionskassen and provident funds – Vorsorgekassen – have merger interests in the newly established Fachverband der Pensions- und Vorsorgekassen association.
The Fachverband legally represents the interests of the eight pension and the eight Vorsorgekassen in Austria. It succeeds the Fachverbandes der Pensionskassen founded in 1992.
Andreas Zakotelsky is the chair of the new association and Stefan Pichler its managing director. The new association is part of the banking and insurance division of the Austrian Economic Chamber (WKO).
As a result of the merger, the assets represented by the Fachverband der Pensions- und Vorsorgekassen association increase to close to €43.8bn and the number of the members to four million.
The merger of interests between Pension and Vorsorgekassen will give “us even more weight” as a group to represent the interest of the members “strongly,” Zakostelsky said.