AUSTRIA - Introducing mandatory second pillar pensions in Austria is 'unrealistic' at present, according to Johannes Ziegelbecker, director at the €1.9bn multi-employer Pensionskasse ÖPAG.
Speaking at the pension fund's annual seminar, Ziegelbecker argued politicians instead need to create more incentives for companies to offer occupational pension schemes and for people to join them voluntarily.
"Forcing companies to offer occupational pension schemes would alienate them," Ziegelbecker told IPE, following a talk on comparing the Swiss mandatory approach to second pillar pensions and Austria's voluntary regime.
"Switzerland only introduced its mandatory system at a time when already two-thirds of employees had access to occupational pension funds," he added. "In Austria, we are a long way off from that."
Approximately 20% of Austrian employees are members of one of the 20 Austrian Pensionskassen, and one-third of those members contribute to the retirement fund themselves.
"We need realistic suggestions to try and boost participation in the second pillar," Ziegelbecker said.
Once a certain level of take-up is reached, the introduction of a mandatory provision could be discussed in order to ensure all employees are covered by the system, he explained.
He also pointed out part of Austria's occupational pension provision is already mandatory as people have been required since 2001 to put severance pay into so-called "Mitarbeitervorsorgekassen" run - as separate funds - by many of the Pensionskassen.
According to the ÖPAG, one of the major obstacles to increasing employee contributions is the complicated tax arrangement. Contributions are partly tax-exempt but only under certain circumstances and after a fair amount of paper work has been filled out.
Most Austrian Pensionskassen have been demanding the introduction of the EET model for several years. At present, the model, under which both pension contributions as well as gains on investment returns are tax-exempt while pension benefit payments are taxed, is applicable only to employer contributions.
"In the long run, the finance minister would not lose any money as the pension benefits will be taxed," Ziegelbecker pointed out.
However, according to ÖPAG calculations, if the change was introduced from next year the finance minister would lose out on €18m which he would only get back decades later on retirement of those taxpayers.
In order to entice more employers to offer occupational pension schemes, Ziegelbecker suggest Pensionskassen schemes should be made part of industry-wide collective agreements.
This would mean unions and employers agree in principle on the possibility of offering a Pensionskasse, making it easier to get an agreement within the companies.
Part of this agreement would be to transfer parts of bonus payments or employee profit-sharing schemes into pension funds.
However, Ziegelbecker warned not to expect any miracles.
"Just because there is this agreement in principle does not mean worker representatives and management will come to an agreement within a few months,." he said.
The annually-negotiated collective agreements would therefore have to create "a long-term framework within which employers and employees have the opportunity to try out the system" with smaller contributions in the first years increasing them later, the head of the ÖPAG noted.
Retaining the voluntary character of the second pillar would also allow companies to tailor Pensionskassen arrangements to their needs more easily than under a mandatory system, he added.