Starting point: A strong pension system needs two pillars

The Austrian pension system is based almost exclusively on the pay-as-you-go system and has guaranteed social security for many decades, but is increasingly under pressure.

Demographic change, rising life expectancy, and a shrinking working-age population mean that fewer and fewer actively employed people are financing the pensions of a growing number of benefit recipients. The ratio of working people to pensioners will shift from 3:1 today to 2:1 in 2050. At the same time, 90% of the financing rests on the first (state) pillar.

This leaves Austria on shaky ground compared to other European countries. Countries like Sweden and Denmark have broadened their systems since the 1990s, supplementing them with a strong second pillar (i.e., funded occupational pensions). These models combine social security with diversified, long-term capital accumulation through investments in global financial markets. The same applies to Austria: a modern, intergenerationally fair pension system must utilize multiple sources of funding. Strengthening the second pillar is therefore not an alternative to the state pension, but rather a necessary complement to it.

Initial situation in Austria

Total pension fund assets in Austria amount to approximately 6 to 7% of GDP, compared to more than 100% in Sweden and over 200% in Denmark.
This imbalance shows that the existing model of company pension schemes is not widespread. Smaller companies in particular often lack access to pension fund solutions, leaving approximately three-quarters of all employees solely reliant on the state pension.

At the same time, more than €30 billion in tax revenue flows annually into financing pensions. This corresponds to roughly a quarter of total budget expenditure and is projected to rise to over 30% by 2029.

Without structural reforms, pension financing will in the medium term claim increasingly larger parts of the budget and restrict scope for other policy areas (e.g. education, innovation, investment).

The government funding gap is thus steadily increasing and will rise to around €90 billion by 2050. At the same time, Austria has one of the highest net replacement rates in OECD countries, which further increases the pressure on the pension system.

Austria's high replacement rate explains the high fiscal burden. At the same time, it is heavily dependent on public funding. A larger capital-funded component would reduce this dependence in the long term.

A more extensive second pillar would reduce this pressure without creating new burdens for companies or the state.

The general pension fund agreement can make the second pillar more stable.

The introduction of a general pension fund agreement would give all employees the opportunity to further develop the existing severance pay system into a genuine form of company pension scheme.

The implementation of the "new severance pay scheme" was an important step in creating a capital-funded supplementary benefit for all employees. Since 2003, employers have been contributing 1,53% of gross salary to a company pension fund. However, these funds are not tied up long-term and can be paid out prematurely after at least three years of contributions upon termination of employment – ​​a model that is more akin to interim financing than genuine pension provision. Furthermore, the legally mandated capital guarantee means that pension funds invest their assets predominantly in very low-risk, short-term investments. After deducting inflation and administrative costs, the real return often remains low.

The general pension fund agreement offers structural progress in this regard:

• He would not replace the existing new severance pay scheme, but would develop it further towards a genuine supplementary pension.
• Higher returns could be achieved by committing funds for the long term and eliminating the rigid capital guarantee.
• At the same time, the system remains voluntary, transparent and cost-efficient.
• Employers and employees benefit equally: companies receive a clearly regulated solution, and employees receive a predictable supplementary pension.

This would significantly strengthen the second pillar of the Austrian pension system without creating new burdens for the state or businesses. The general pension fund agreement is therefore not a break with the existing system, but rather its economically sound further development: towards greater stability, personal retirement savings, and real capital formation.

International examples: Capital funding as a stability factor

The advantage of funded pension systems lies in long-term wealth accumulation through stable returns. Pioneering countries like Denmark and Sweden have demonstrated since the 1990s that funded models can function reliably for decades while simultaneously strengthening the national economy.

• Denmark has a funded pension system with a capital volume of around EUR 500 billion for a population of approximately 6 million.
• Sweden manages over 900 billion euros in pension assets for a population of just under 11 million.
• Austria's total expenditure (excluding pension funds) is around 50 billion euros for approximately 9 million inhabitants.

These figures reflect the high penetration rate in Scandinavia: Up to 95% of employees there participate in company pension schemes, mostly on a mandatory basis or regulated by collective agreement.

The result is enormously large and stable capital stocks, which continue to grow through continuous contributions and long-term returns. These systems build trust, promote financial literacy, and strengthen openness to capital markets.

In addition, national economies also benefit directly: Pension funds invest in local infrastructure, businesses, and startups. In Denmark, for example, the umbrella fund "Vaekstkapital" was established jointly with the state pension funds to invest specifically in young, innovative companies. This directs capital into productive, growth-oriented sectors: an approach that secures prosperity and employment in the long term.

ÖBAG's perspective

From the perspective of a state holding company, the stability of the second pillar is a key contribution to a fair and competitive Austria for all generations and would have a positive impact on several economic policy dimensions:

• From a fiscal policy perspective, because broader capital coverage relieves the burden on the first pillar and reduces the need for government subsidies in the long term.
• From a location policy perspective, long-term pension investments expand the financing base for the Austrian capital market and the real economy.
• From a social policy perspective, company-provided supplementary pensions reduce poverty in old age, secure purchasing power in old age and promote social stability.
• From a corporate policy perspective, because company pension schemes increase employer attractiveness and create a competitive advantage in the skilled labor market.

As the main shareholder of APK Pensionskasse AG, ÖBAG has firsthand knowledge of the importance of occupational pension schemes. Our experience shows that professionally managed pension funds generate stable returns over decades, thus making a significant contribution to retirement provision. This successful model should be made accessible to as many people as possible.