AUSTRIA - A new report by the Osterreichisches Institut fur Wirtshaftsforschung (WIFO), the Austrian Economic Research Institute, paints a positive picture of developments in the country's occupational pension sector but warns that both costs and expectations are still too high.
The report focuses on the fastest growing part of the market, Pensionskassen, and suggests that a combination of threats to the state pension, better quality information and ongoing consolidation is likely to see membership numbers continuing to rise in the near future.
It warns, however, that the levels of performance achieved throughout the 1990s place an unrealistic burden of expectation on funds. It is critical too of the level of management costs in the sector, which it says compare poorly with both the similar Swiss system and with the state pension bureaucracy.
The report also warns that if market conditions do not substantially improve in the near future the minimum return rule, currently set at 1.5% could pose a threat to the stability of some funds. It recommends a change to current regulations, shifting risk towards savers and offering a choice between risk and return.
The number of people saving in company specific or non-company specific Pensionskassen has risen exponentially since their inception in the early 1990s, but numbers are still low. Just 14% of employees are covered by occupational schemes in Austria and 10% – 360,000 people – by the various Pensionskassen, which manage e8bn in assets.
Non-company specific funds control over 75% of the market, 90% of which is managed by the four biggest funds. The report suggests that further rationalisation of management and investment costs may lead to company specific funds moving towards outsourcing or merging with other funds. In 2000 the Verband Pensionskasse merged with its manager, turning itself into an industry-wide fund, before being sold to ÖPAG the following year.
In a survey carried out by the WIFO, 59% of respondents were concerned about the financing of the state pension, 75% thought occupational schemes were important, 40% thought they were very important, and 58% were concerned about the effects financial markets were likely to have on occupational schemes.
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