At the same time as the UK government is planning to 'nudge' young workers into pensions saving via auto-enrolment reforms, Austrian twenty-somethings are hoping that their government can encourage more companies to offer an occupational pension, according to a new survey released last week. The head of the association that commissioned it has also told Pension Funds Insider that the country can learn from neighbouring Switzerland in improving occupational pension provision

The Austrian association of pension funds (Fachverband der Pensionskassen) recently commissioned a study of 1000 workers under the age of 30 which found that 80 percent of them have already thought about the level of pension they want and have come to some uncomfortable conclusions as a result. The majority of this group reckon they are to lose at least 40% of their final salary upon retirement, which is a significant amount in a country where a generous state pension has traditionally matched 80% of pre-retirement yearly earnings.

In fact, figures indicate that a state pension in Austria is currently 70% less generous than in 1989 (adjusting for inflation) due to demographic pressures. 66 percent of young Austrian employees said that they would be prepared to sacrifice part of their salary for future pension provision in anticipation of the further erosion of the public pension pillar.

Herbert Kling, from the meinungsraum.at institute, which was commissioned to carry out the survey, said: "It becomes clear from the study that the young generation see a corporate pension as an option for better provision. 69 per cent of those asked think that the state, along with their state pension obligations, should advocate occupational pensions."

Other notable results from the study were that 75% of young employees at companies that don't offer a pension would like their employers to make a scheme available and about one-third say a pension plan is an important selling point when applying for jobs.

The generous state pension has resulted in occupational pension provision up to now being largely restricted to the larger Austrian employers. Andreas Zakostelsky, head of the association of pension funds says "someone beginning to work today at a big company or an institution is eight times more likely to be able to sufficiently finance their lifestyle in old age as a new entrant to a small business. This gulf has to be closed."

Inspiration from over the mountains

Zakostelsky feels Austrian politicians should look beyond their borders in order to foster a greater occupational pension industry. In referencing the EU commission's recent green paper on pensions, he spoke of his desire to have 25% of overall pension pots made from occupational pensions, up from 5% today.

He added that he saw the Austrian system of collectively negotiating pay levels and working conditions across industrial sectors as a way to boost occupational pension provision, saying that "a stronger anchoring in the collectively agreed contracts or in company agreements with their works councils would be a good boost."

Zakostelsky told Pension Funds Insider that the pension systems of the Netherlands and neighbouring Switzerland were models he would like to see copied in Austria. He said he admired systems "that have had an established core of occupational pension provision since the 1970s."

"On top of that tax incentives would help develop occupational pension provision," Zakostelsky said. He explained to Pension Funds Insider that "tax relief is already given in Austria for the contributions that employers pay to their employees' pension pots but is not given though employee contributions. Pension funds are therefore calling for the extension of tax relief to employee contributions."

Speaking on the increasingly reduced capabilities of an over-stretched state pension system, Zakostelsky said: "Young employees know that and expect politicians to act appropriately." The Austrian government has committees conducting ongoing reviews into pension fund law and the state system but the pension industry complain that these have no mandate for an integrated reform that will help the occupational pension industry to develop.

First published: 16.06.2011

dbillingham@wilmington.co.uk