Employer action code: Monitor
Draft amendments to the Pension Fund Act and related legislation would expand the investment and payout options available to employees with regard to their mandatory defined contribution (DC) severance account (Abfertigung neu) assets, among other changes.
Key details
Proposed changes include:
- Betriebliche Vorsorgekassen (BVK) providers would be able to offer a new investment group option for DC severance assets:
- The new investment group option would not be subject to a minimum return guarantee on DC severance-related contributions (a minimum zero percent return would continue to apply for contributions within traditional BVK investment options). Investment fund options for employees to choose from would include life cycle models with differing risk levels
- Employees could choose to transfer all or part of their accumulated DC severance assets, and to direct future DC severance contributions, to the new investment group option with their current BVK provider, on a free-of-charge and irreversible basis. The minimum mandatory DC severance contribution (1.53% of covered earnings, paid by employers) would be unchanged
- In the event of financial hardship, such as due to serious illness or long-term unemployment, employees would be allowed access to their accumulated DC severance assets within the new investment group option
- All employees could choose to transfer their DC severance assets to a private pensionskasse, with the option of receiving future severance payouts as a lifetime pension (as opposed to the standard lump sum severance payment). Currently, only employees with an occupational pensionskasse account from a current or former employer may choose to do so
- Dormant DC severance accounts that have not received any contributions for at least three years could be merged with an active account to which severance payments are regularly made by the employer
Employer implications
According to the Austrian Financial Market Authority (FMA), three-quarters of workers do not have access to a private pension to supplement their social security benefits (in contrast, 59% of companies surveyed by WTW offer some form of supplemental retirement benefits). In addition, due to the guarantee of no investment loss on DC severance contributions, BVK severance funds are managed conservatively by providers. According to the FMA, the average annual return on BVK accounts over the 10-year period ending in 2024 was 3.7%, against average annual inflation of 2.7% over the same period (World Bank data). The proposals (planned to come into force in 2027) may provide an opportunity for employers to review whether and how best to provide supplemental retirement benefits for their employees.
