In Austria, pensions have hit the headlines over the past year. The run-up to June’s passing of the pensions reform bill by the Austrian parliament was marked by national strikes and demonstrations as points of the bill were hotly opposed.
In the end, concessions had to be made on key points. But the main issue facing the Austrian Pension Fund Association – the local EFRP member – has been another piece of legislation.
Lower profile perhaps, but also pressing was the amendment of the Pensionskassen Act. The Austrian government made the amendment in August, moving to strengthen the asset base of occupational pensions – the Pensionskassen. It relaxed the rules of the Pensionskassen Act 1990 so that Pensions-kassen no longer have use their capital to meet their guaranteed performance targets.
Wolfgang Lehner of the Austrian Pension Fund Association says that so far, the capital bases of the Pensionskassen has not been damaged by the requirement. This is because the past three years of poor market performance were offset by the buoyant years of 1998 and 1999
in the five-year measurement period. But any persistence of the bear market could have a negative impact.
The amendment was to some extent a precaution, he says. The Pensionskassen, structured as joint stock companies, are required to meet a certain performance target over a five-year period. This is linked to the interest rates paid by government bonds.
Under the old legislation, a Pensionskasse that failed to achieve this target would have had to make up the shortfall from its capital base. This is said to have affected their long-term investment strategy and their ability to invest in the riskier asset classes.
Now, a Pensionskasse that fails to achieve the minimum performance target is no longer obliged to close the gap with a payment from its capital. But it must still ensure that it pays enough into pensions in payment to ensure that the level of benefit for retired members is maintained.
The amended PKG also introduces the idea of a performance guarantee reserve. The aim is to strengthen the capital base of the Pensionskassen and provide additional security for beneficiaries, since the assets in the reserve will be specifically linked to the performance guarantee.
The association had an active role in seeing the legislative change through, says Lehner. This included lobbying and discussions with the country’s decision makers, and researching to find out what kind of solutions were possible.
In this context, he says, and in its attempts to resolve other problems that arise, membership of the EFRP has had real advantages for the association. “Contact to other European associations is useful, because one can learn from each other,” by best practice analysis, he says.
Members can try to find solutions to their national problems, he says. Of course each member has its own national framework to deal with, but some of the overall problems faced are similar. As well as this, the association finds the performance comparisons very helpful.
“As a European association of pension funds, it has a very important position as a think-tank and centre of expertise. Whenever an issue with a European aspect occurs, one can get information from the EFRP,” he says.
“In addition, the EFRP informs about the ongoing initiatives in the EU institutions, which have – sooner or later – an impact on national legislation. It is important to be informed about European development in order to have arguments on a national basis.”
In the next year, Lehner expects to see the implementation of the EU Directive dominating the agenda for the association, and discussion related to it. Though issues are bound to come up, on the whole he does not believe the directive will necessitate radical change to Austrian law.
“We expect no major changes to happen, or legislation – in the Pensionskassen Act and the Betriebspensions Act – because they are modern and will not need a lot of amendments,” he says.

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