What we can learn from Austria

Straightforward pensions system ensures that the older generation is well-provided-for.

pensioner
K.-U. Häßler - stock.adobe.com

What will I live on when I’m old? This is an important question for young people. In many countries, the answer is simple: your pension. Which in turn raises the question: will my pension be sufficient to cover my cost of living? The OECD (Organisation for Economic Co-operation and Development) offers one general answer by comparing pension provision systems worldwide.

On average, pensioners in those countries studied receive 58.6 percent of their final net income. For example Germany comes in below the OECD average (at 51.9 percent in 2018), while Austria far exceeds it (at 89.9 percent in 2018). The average pre-tax pension is 900 euros in Germany and 1,400 euros in Austria. In 2017, the risk of pensioners suffering from poverty in old age was 17 percent in Germany and 12 percent in Austria, according to Eurostat.

What is special about Austria’s system?

Statutory pensions insurance in Germany is compulsory for employees and is financed out of their contributions. Civil servants receive pensions from the state, while the self-employed are not obliged to take out pensions insurance. In Austria, everyone in gainful employment pays into the pension insurance system, be they employees, civil servants or self-employed. Rates of contribution in Austria are roughly four percentage points higher than in Germany. Pensions in Austria are financed from contributions and state subsidies from tax revenue. Because health insurance contributions are lower and no nursing care insurance has to be paid, overall social insurance contributions are lower in Austria than in Germany.

Financially secure: a pensioner playing chess in Salzburg
Financially secure: a pensioner playing chess in Salzburg picture alliance / Markus C. Hur

How are pensions in Austria organised?

Pensions in Austria are paid 14 times per year, meaning that people receive additional holiday and Christmas payments. Because the length of time during which people pay into the system counts for a great deal, even low-earners who work for many years are paid a decent pension. Furthermore, anyone who receives a monthly pension of less than 933 euros will have their pension topped up to this amount, regardless of their own financial assets. If converted to twelve annual payments, the minimum pension thus amounts to 1,089 euros, which is well above the average pension in Germany. Those whose pensions are not enough to live on in Germany can apply to the social welfare office for basic income support.

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