The Austrian System of Individual Pension Accounts – An Unfinished Symphony
The 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.
Volume (Year): (2013)
Issue (Month): 4 ()
|Contact details of provider:|| Postal: P.O. Box 61, A-1011 Vienna, Austria|
Phone: +43/1/404 20 7405
Fax: +43/1/404 20 7499
Web page: http://www.oenb.at
More information through EDIRC
|Order Information:|| Postal: Oesterreichische Nationalbank, Documentation Management and Communications Services, Otto-Wagner Platz 3, A-1090 Vienna, Austria|
References listed on IDEAS
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.:
- Markus Knell & Walpurga Köhler-Töglhofer & Doris Prammer, 2006. "The Austrian Pension System – How Recent Reforms Have Changed Fiscal Sustainability and Pension Benefits," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 69–93.
- von Gaudecker, Hans-Martin & Scholz, Rembrandt, 2006.
"Lifetime Earnings and Life Expectancy,"
Sonderforschungsbereich 504 Publications
07-05, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Gaudecker, Hans-Martin von & Scholz, Rembrandt D., 2006. "Lifetime earnings and life expectancy," Papers 07-05, Sonderforschungsbreich 504.
- Hans-Martin von Gaudecker & Rembrandt D. Scholz, 2006. "Lifetime Earnings and Life Expectancy," MEA discussion paper series 06102, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
- Hans-Martin von Gaudecker & Rembrandt D. Scholz, 2006. "Lifetime earnings and life expectancy," MPIDR Working Papers WP-2006-008, Max Planck Institute for Demographic Research, Rostock, Germany.
- Hans-Martin von Gaudecker & Rembrandt D. Scholz, 2007.
"Differential mortality by lifetime earnings in 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, January.
- Johann K. Brunner & Bernd Hoffmann, 2010.
"Versicherungsmathematisch korrekte Pensionsabschläge,"
NRN working papers
2010-17, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
- Johann K. Brunner & Bernd Hoffmann, 2010. "Versicherungsmathematisch korrekte Pensionsabschläge," Economics working papers 2010-13, Department of Economics, Johannes Kepler University Linz, Austria.
- Knell, Markus, 2010. "How automatic adjustment factors affect the internal rate of return of PAYG pension systems," Journal of Pension Economics and Finance, Cambridge University Press, vol. 9(01), pages 1-23, January.
- Markus Knell, 2012. "Increasing Life Expectancy and Pay-As-You-Go Pension Systems," Working Papers 179, Oesterreichische Nationalbank (Austrian Central Bank).
- Staubli, Stefan & Zweimüller, Josef, 2013. "Does raising the early retirement age increase employment of older workers?," Journal of Public Economics, Elsevier, vol. 108(C), pages 17-32.
When requesting a correction, please mention this item's handle: RePEc:onb:oenbmp:y:2013:i:4:b:2. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudia Kwapil)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.