AUSTRIA - Approximately 500,000 self-employed people will be granted access to the severance pay funds from next year.

Severance pay is a major part of occupational pension provision in Austria, as employers set aside money to pay to employees when they leave a company.

The government made it obligatory in 2003 for this money to go into so-called 'Mitarbeitervorsorgekassen' (MVK) which were set up by various 'Pensionskassen'.

Employees with arrangements pre-dating this deadline could choose whether or not to convert to the new model or leave the money with the company.

From January next year MVK will also be open to self-employed people. Part of the social insurance contribution made by entrepreneurs and independent contractors will automatically be redirected into an MVK of their choice, economy and labour minister Martin Bartenstein announced.

Farmers and self-employed people, such as lawyers, doctors or architects, can choose whether or not to pay into one of the severance pay funds.

This new model will not increase social insurance payments as the health contribution will be cut by almost as much as the MVK contribution, which is 1.53% of salary.

But payments to the severance pay funds are exempt from tax and lump sum payments at retirements are tax-privileged.

Fritz Janda, general secretary of the MVK association, told IPE negotiations between the coalition partners are scheduled for this week on details of the new law.

"I cannot comment yet as I have not seen a draft," he added.

However, Andreas Csurda from the MVK platform, a department in the chamber of commerce, said he welcomed the draft law.

He stressed the growth in assets in the severance pay funds will also benefit all people who have acquired rights in a MVK. "This will have positive effects on investments," he noted.

At the end of June, the nine MVK had €1.37bn in assets and a total of 2.34 million Austrians had acquired rights to a severance pay in an MVK.

Karl Timmel, chairman of the board at Austria's largest Pensionskasse, VBV, told IPE in the summer the Pensionskassen themselves are also negotiating a change in regulations to allow self-employed to contribute to occupational pension funds.