AUSTRIA - The 1,200 employees of the union federation ÖGB have agreed to plans by the management to start funding pension liabilities.

The majority of members (84.14%) voted in favour of the new model which will allow employees to choose from three options:

get the pension benefits paid out; transfer them into a Pensionskasse, or transfer them into a "betriebliche Kollektivversicherung".

The latter is an insurance product modelled on Pensionskassen with more conservative investments but certain guarantees, which was introduced to the Austrian second pillar in 2005.

Over the coming months, all employees who started work before the year 2000 have to choose one of these options.

Those who joined the union since then are already members of the Allianz Pensionskasse but this contract has now been re-negotiated, the ÖGB informed its employers in a leaflet.

All of the union's pension assets will now be jointly managed by the Allianz Pensionskasse and the Bonus Pensionskasse, a spokesman for the union federation confirmed to IPE.

A similar system was put in place last year by the large Austrian crystal glass producer Swarovski, when it opted for two Pensionskassen in order to diversify the management of the assets.

Up until that point, the construction of using two Pensionskassen for one company was mostly associated with public entities such as local governments or the Austrian broadcasting corporation ORF who chose the construction for political reasons.

They opted for one Pensionskasse whose parent bank is more associated with the conservative side of politics and another from the social democratic side as most Austrian public entities including large companies tend to be split along party lines. 

The ÖGB itself is one of two large union federations, the other one being the ÖAAB, which represents conservative union members.

The Austrian bank Bawag, owned by the ÖGB, got into trouble three years ago over speculations in the Caribbean and a loan granted to a US investor who was arrested for falsification of accounts only days after the loan was approved.

These incidents now known as "Bawag-scandal" and subject to criminal proceedings left the union federation several million euros in debt forcing it to sell Bawag to a consortium led by US private investment house Cerberus Capital Management L.P. early last year.

"Even after the sale of Bawag the financial situation of the ÖGB calls for further cuts in various areas," the union explained in the leaflet.

"Would we keep the old system [of unfunded pension promises] and the reserves necessary in our accounts we could not close our books for 2007. This would not only be a fatal blow to the ÖGB employees but also to our 1.2 million members."