Rising costs

Every fourth budget euro flows into the pension system

The costs of the pension system are high and continue to rise.

(Bild: dpa/Oliver Berg (Symbolbild))

November 7 is "Pension Gap Day". This is because all income tax collected by the federal government up to this date goes towards pensions. Fewer and fewer working people have to finance more and more senior citizens. Agenda Austria warns: without reform, the costs will continue to explode. 

The state is contributing around 30 billion euros to the pension system this year. This is because the contributions are nowhere near enough to finance it. "Every fourth euro in the budget is already accounted for by this," says economist Dénes Kucera from Agenda Austria in an interview with "Krone". This is also an enormously high burden on the federal budget compared to the OECD average and restricts other expenditure.

November 7 is "Pension Gap Day"
Today, November 7, is also "Pension Gap Day". If you compare the costs with wage tax revenue, all taxes paid by employees and pensioners to date have only gone towards securing the pension system. This corresponds to 85 percent of income tax revenue. "This day is shifting further and further back, as the subsidy is getting bigger and bigger," says the expert.

It is likely to increase to 36.7 billion euros by 2028 (see chart). This year alone, the subsidies for pension insurance will rise by almost 30 percent, while expenditure on civil servants' pensions will increase by 10 percent. Many "baby boomers" are now retiring.

(Bild: Krone KREATIV)

However, the problem of exploding subsidies will not disappear on its own; a pension reform would be necessary, even if it does not balance the budget in the short term. Kucera calls above all for an increase in the de facto retirement age and an automatic adjustment of the statutory retirement age in line with life expectancy. Currently, an average of 1.7 working people finance one pensioner; by 2050, this figure will be 1.3.

Qualified immigration can stabilize the system
In view of low birth rates, Austria will also need immigration to finance the system so that there are still enough people in work. Strengthening occupational and private pension provision would also ease the burden on the state. Greater involvement of the capital market ("equity pension" as in Sweden) could also ease the burden on the state budget in the long term.