AUSTRIA - Increasing the real retirement age is enough to ensure people will still be able to live off the state pension in 60 years' time, according to Bernhard Felderer from the Austrian Institute for Advanced Studies (IHS).
 
Data compiled by the economic research institute suggests pension increases of below inflation level and state subsidies of around €9bn should be sufficient to ensure people receive an income replacement rate of 80% in 2070 - down from over 100% at present - at an effective retirement age of 65 or more.
 
"Of course, people will be able to live off the state pension in the future," Felderer told IPE.
 
"But if we do not manage to increase the effective retirement age, pensions will have to be cut considerably and those who can afford it will have to take out a supplementary pension," said Felderer.
 
The IHS calculated with the measures mentioned, pension spending would only increase to 13.5% by 2070 from the current level of just over 10%.
 
If nothing is done, however, this figure will shoot up to 18% - a situation Austria appears to be facing, the IHS claimed.
 
Previous Austrian pension reforms have promised these measures but legislators eventually found ways to ensure people are still able to retire at 55 or even earlier.
 
The average retirement age is currently 53.9 years for men and 50.6 years for women while the state retirement age is 65 for men and 60 for women, increasing to 65 over the next decade.
 
Felderer identified what he described as the "hard-working clause" as the most popular route for gaining early retirement, as this allows people who have paid pension contributions over a high number of years to retire early without losing any money.
 
To tackle the pensions funding crisis, the IHS head has called for an abolition of special exit clauses and for a separation of disability from the pension system.
 
IHS pension expert Ulrich Schuh noted it was a shame recent years of good employment rates and economic growth were not tapped to introduce incentives encouraging people to work longer.
 
"The longer we wait to make necessary unpopular changes to the pension system the harsher the measures will have to get," said Schuh.
 
The institute's demands have sparked severe criticism among former opposition parties FPÖ, BZÖ and the Greens which all stressed they would not agree to such cuts.
 
The Social Democrats (SPÖ) and the conservative People's Party (ÖVP) - who are expected to hold coalition talks following the elections in late September - have not commented on the IHS' demands although SPÖ-head Werner Faymann said a few days ago he wants people to be able to live off their state pension.

Have Your Say: Dr Jay Ginn, pensions researcher, comments:

"This seems to ignore differences in men's and women's working lives. As I understand it, an option of early retirement on a pension is available for those with enough pension contributions. This option is much less available to women who have had to take time out to raise children and do the bulk of domestic work and eldercare.

Therefore, it could be said to constitute indirect sex discrimination. Given the sustainability issue, it would make sense to remove the option altogether. Policymakers in Austria should at least be aware of the gender impact of current pension policies and of reforms under consideration."
 
If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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