AUSTRIA - Labour organisations are demanding more guarantees for returns on pension assets, following publication of annual return, but Pensionskassen are urging members to see the whole picture.

Austrian Pensionskassen posted an average return of 2% for the last year leaving the five-year average at 6.8%. (See earlier IPE-article: Austrian funds at 2% 'do better than many funds elsewhere')

For around 9000 pensioners, this result means a cut of their pension amounting to as much as 6%.

"Pension fund members have to cease being hostages to speculants on the stock market," commented Werner Muhm, president of the chamber of labour AK.

He criticised the fact pension fund members are "baring all the risks" and "at the mercy of the stock markets".

The organisation of pension fund members PEKABE has also demanded a change to the law on pension funds to ensure there will be no further pension cuts.

Both organisations blamed the asset allocation and risk profile of Pensionskassen for the low returns.

But Günther Schiendl, new member of the board at the €4.5bn VBV Pensionskasse, said mainly people with a very high actuarial rate of up to 6.5% during their pay-out phase are affected by the pension cuts.

"Instead of blaming the Pensionskassen, the discussion should focus on the parameters of these special contracts which derived from transfers of members from older systems," he explained to IPE.

"Figures like actuarial rates of 6.5% were calculated at times when market returns were higher. Those returns are no longer achievable in today's markets without taking risks," he added.

Additionally, he noted the costs of longevity risks had increased considerably over recent years but it is Pensionskassen which have to bear them.

"In some of those old plans we have to earn another 1.5% on top of the high actuarial rate to make up for actuarial losses. This leaves our return target for such plans in excess of 8% - only then can we ensure pension payments at the same level," Schiendl said.

"Going forward, only a constructive discussion about changing these parameters, or adaptions to the system for the pensioneers, can help," he noted.

Schiendl argued critics of the system should also bear in mind Pensionskassen are as important for active members as they are for pensioners.

"Indeed, they will depend much more on their income from savings in Pensionskassen than today's generation," he noted.

According to Schiendl for the younger generation the second-pilllar is "running well" as they provide good returns over the long run and the actuarial rate in those new contracts - which make up almost 90% of all contracts - is legally set at the "realistic level" of 3.5%.

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