Pension systems in Europe: challenges and best practices

While Austria's expenditure on pensions is well above the EU average and continues to rise, benefits are falling sharply. These are facts that have been discussed time and again, but have not yet been effectively addressed. A recent EcoAustria study commissioned by ERSTE Foundation and the Vienna Insurance Group (VIG) compares international pension systems and thus provides the first concrete starting points for effective pension reform. Based on the results of the study, a transformation process is to be initiated that will increase the efficiency of the Austrian pension system and strengthen the competitiveness of Austria as a business location.

It is well known that Austria's expenditure on pensions has to be supported by the state budget. Austria's public spending on pensions is currently the fourth highest in the OECD and well above the EU average. Without reforms, they will continue to rise. "It is often argued that expenditure will only increase moderately. But even this will not be without consequences: the average pension will fall relative to the average wage and the risk of poverty in old age will therefore increase. The comparison with other countries and their pension systems shows that the inclusion of funded components can secure pensions in the long term," says EcoAustria Director, Monika Köppl-Turyna, on the details of the country comparison.

For example, the ratio of the average pension to the average wage is 61% in Denmark and 67% in the Netherlands, while it is only 56% in Austria. Both the Netherlands and Denmark rely on partially funded pension systems, thereby reducing the burden on their state budgets. By reserving less money in the budget for pensions, more is freed up for other issues such as the green transformation. It is crucial not to waste any more time now and to start looking for new solutions in close cooperation with all relevant social groups.