The current discussion of the reform of the pension system is at cross-roads between safeguarding entitlement programs and reacting to economic and social change, as well as the aging of the population, and the rise in federal transfers to the public pension system. The report on the perspectives of the Austrian pension system, which was recently presented by the Federal Ministry for Labor, Health, and Social Affairs, recommends certain measures aimed at ensuring the survival of the pay-as-you-go system given a host of macroeconomic, demographic, and political risks. The proposed reforms are intended to maintain the net of tax pension income at a high level, and would require the expansion in the federal subsidy to the pension system from the present 22 percent (1995) to about 37 percent (2030) of pension payments, even if the reform proposal were implemented in its entirety. A sustainable consolidation of the old-age pension system would therefore keep the financial burden for the federal government high and would not alleviate the political risk of another round of reforms. As long as the federal budget runs a deficit, further reductions in pension benefits can hardly be avoided, especially because the federal government's leeway for increasing expenditures is severely restricted by the deficit limit of 3 percent of GDP as laid down in the Pact on Stability and Growth. Most of the income drawn by retired persons in Austria derives from the public pension system. About 9 percent of employees are integrated into a company pension system. Payments by private life insurance companies totaled ATS 27.5 billion in 1995, or 7.5 percent of the total expenditures on pensions by the public pension system. Against this background, employees as well as self-employed find it attractive to shift the focus of old-age income provision from the first pillar, the public old-age system, to the second and third pillars (corporate and private retirement income provisions); because a fully funded pension system combines the advantages of individual choice with the immunity vis-à-vis demographic shifts and is, moreover, relatively free from political risks.