EUROPE - The government appointee responsible for Austria's capital markets, Dr Richard Schenz, has said he expects to see a shift of funds managed under the country's state supported private pension scheme, the Zukunftsvorsorge, into eastern Europe when the accession countries formally join the EU on 1 May.
Under current rules, 40% of funds invested in Zukunftsvorsorge must be invested in equities in under-capitalised EU markets, defined as a capitalisation under 30% of national GDP.
When the state supported scheme was introduced in 2002, Austria, Greece and Portugal fell into this category, but the growth of the Athens and Lisbon markets means only the Vienna Börse, capitalised at 22% of national GDP, remains within those guidelines.
This appears certain to change in May when 10 new countries join the EU. Only Cyprus, Malta and Estonia have sufficiently developed markets to exempt them.
Dr Schenz said that up to 10% of the fund flow annually was likely to be switched into eastern European markets but called for only minor changes to regulations, including a relaxation to allow one-off payments and a reduction in equity allocations to between 10% and 20%, five to seven years before retirement.
In the past Schenz has been critical of the scheme’s focus, saying in a National Bank report on financial stability last year that it would do neither public sentiment towards private pensions nor the Austrian capital market any good.
The equity regulations were initially conceived as part of a government initiative to boost the country’s capital market and have been credited in part for last year’s growth – the ATX index rose 34.4% on the year.
Previously only 1.5% of assets managed by Austrian funds were invested in Austrian equities. The finance ministry has said it considers the state supported products “an appropriate instrument for strengthening capital markets.”
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