Expert proposal

How pensions could increase by up to 400 euros

A company contribution of 2.5 percent of the gross salary would already significantly increase future pensions.

(Bild: APA/Barbara Gindl)

The Chamber of Commerce is campaigning for the nationwide introduction of company pensions - and all employees could benefit from this in their later retirement. This is because even small contributions would significantly increase future pensions.

Supplementary pension funds hold great potential for financial security in old age: according to a new Wifo study commissioned by the Austrian Economic Chamber's Association of Pension and Provident Funds, even small contributions can have a major positive effect on retirement provision. The Chamber of Commerce is therefore urgently calling for a full expansion of the pension fund system in Austria.

The "second pillar" of the pension system
Pension and provident funds are regarded as the second pillar of the Austrian pension system: companies can provide additional security for their employees in old age by setting aside a certain percentage of their salary or a fixed amount for their pension. There are three options: Either, part of the salary is used for the contributions, or the employer pays in, as a kind of bonus or additional benefit, or - the most common variant - there is a mixed form. In any case, a pension fund manages the assets and later pays out the retirement pensions.

Up to 400 euros a month more pension
The problem is that not all companies currently offer such a company pension. However, according to the trade association, a full expansion is urgently needed, and a new Wifo study supports this demand. This is because, assuming a contribution level of just 2.5 percent of the annual gross salary, the later pension would increase by up to 400 euros per month.

Wifo Director Gabriel Felbermayr: "Potential to secure retirement income in Austria in the long term."

(Bild: Harald Dostal, Krone KREATIV)

In concrete terms, the first pension would increase by 15 to 19 percent, depending on the individual income level. For men, who earn more on average than women and could therefore save more with the 2.5 percent, this would mean a monthly pension increase of 320 to 400 euros, for women it would be an additional 160 to 200 euros. Wifo examined 28 typical life income trajectories.

Later supplementary pension
However, even a moderate index-linked sum of 150 euros per year would have a positive effect on old-age provision: It would result in an increase in the first pension of between one and nine percent. Depending on demographic characteristics, this would result in up to 150 euros, 14 times a year, as a later supplementary pension.

Wifo Director Gabriel Felbermayr: "Against the backdrop of increasing demands on the pension system, the supplementary company pension offers enormous potential to secure retirement income in Austria in the long term and make it fairer - low earners in particular would benefit from a pension fund solution."

Andreas Zakostelsky, Chairman of the Association of Pension and Provident Funds, emphasizes: "A full expansion is urgently needed now to ensure that pensioners can maintain their accustomed standard of living in the future."