AUSTRIA - Trade unions and employee organisations in Austria are up in arms over proposed changes to the second pillar which will introduce an "opt-out" clause for companies providing a minimum performance guarantee on pension capital.
A draft proposal by the Ministry of Finance will allow companies to decide if they want to continue providing the minimum guarantee. If a company chooses to carry on providing the guarantee it will then have to provide reserves for this, as per new EU legislation. Its investment structure will also have to be altered to meet this requirement.
Trade unions, pension funds and finance ministry officials are now trying to hammer out a deal which will satisfy all parties concerned before the paper is debated in parliament in the third quarter.
Josef Woess (pictured), head of social policy department at the Chamber of Labour in Vienna, said: “We are opposing this move. We believe that pension funds should guarantee a minimum security net and we feel it is not too much to ask of funds to guarantee an average of around 1.5% over a period of five years, as they have been doing so far.”
Woess argues that pension payments should not be risky: “We do not have a long tradition of company pension funds in Austria and these pension funds cover only 10% of our employees. The market crash of three years ago shows that we must avoid arrangements that are too risky. And this is why we are working with the pension funds to come to some kind of common solution which we can then take to the government.”
Paul Roettig, managing director of Hewitt Associates Central and Eastern Europe, said that as the minimum guarantee is not mandatory in other European countries, Austrian pension funds could argue that this would hurt their competitiveness.
“This resistance to the proposal has a lot to do with the mind-set of Austrians,” he said. “There is a thinking here that if I give you my money, you have to provide some kind of guarantee. Austrians as a race are quite risk averse. When the legislation was drafted in 1990, the government said that pension funds had to reach a minimum performance, but they didn’t say anything about building reserves. Now the new EU pensions directive says that if you guarantee something you should also have a basic provision in the books. This will eat into the capital of the pension funds, hence this proposal.”
Fritz Janda, managing director of the Austrian Association of Pensionskassen, agreed: “Guarantees such as the minimum performance guarantee are cost intensive.
The Austrian Pensionskassen system is characterised by a slim organisation in order to be able to provide a propitious financial service to the beneficiaries. We believe that it is in the interest of the beneficiaries to offer an additional choice.”
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