The Austrian System of Individual Pension Accounts – An Unfinished Symphony
AbstractThe new Austrian pension system based on individual accounts is a clear improvement over the former system. A serious shortcoming of the new system, however, is that it does not react to demographic changes, in particular to increases in life expectancy. I contrast the Austrian and the Swedish pension account systems to demonstrate how and why the latter is able to react to demographic changes. I also show how the Austrian system could be adapted to include such an automatic adjustment mechanism. In particular, this would require a continuous modification of the “key formula” 80/65/45 (80% replacement rate after 45 contribution years at a retirement age of 65). In a next step I argue why an increase in the average retirement age seems to be the most appropriate and viable reaction to the increase in life expectancy and why alternative adjustment policies have their limits. Finally, I discuss some commonly expressed objections to this adjustment strategy. I also sketch how a system of individual accounts could be amended in order to take some of these objections into account.
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Bibliographic InfoArticle provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Monetary Policy & the Economy.
Volume (Year): (2013)
Issue (Month): 4 ()
Postal: Oesterreichische Nationalbank, Documentation Management and Communications Services, Otto-Wagner Platz 3, A-1090 Vienna, Austria
Find related papers by JEL classification:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J1 - Labor and Demographic Economics - - Demographic Economics
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hans-Martin von Gaudecker & Rembrandt D. Scholz, 2007. "Differential mortality by lifetime earnings in Germany," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 17(4), pages 83-108, August.
- Robert Holzmann & Edward Palmer, 2006. "Pension Reform : Issues and Prospects for Non-Financial Defined Contribution (NDC) Schemes," World Bank Publications, The World Bank, number 6983, August.
- Staubli, Stefan & Zweimüller, Josef, 2013. "Does raising the early retirement age increase employment of older workers?," Journal of Public Economics, Elsevier, Elsevier, vol. 108(C), pages 17-32.
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