Better Finance – Country Case: Austria
With around 90 percent of the average retirement income received from public pension entitlements, the Austrian pension system is very reliant on the first pillar. Occupational pensions are primarily offered through pension funds and insurance companies. Direct commitments are an alternative vehicle, but their usage stagnates. The option for defined contribution (DC) plans with favourable tax treatment offered either by pension funds or insurance companies boosted the prevalence of occupational pensions in Austria. While occupational pensions have become more popular over time, low interest rates and a high liquidity preference dampened demand for individual life insurance contracts. Over the years 2002 through 2021, the performance of pension funds in real net terms has been positive, with an annualised average return of 1.5 percent before tax. The life insurance industry followed a distinctly more conservative investment policy and achieved an average annual net real return before tax of 1.9 percent.