WIFO proposes pension reform in Austria amid demographic shifts

Gabriel Felbermayr, President of the Austrian Institute of Economic Research (WIFO), has proposed a fundamental overhaul of Austria’s pension system to address demographic changes and economic dependencies. The current model, which relies heavily on active workers' premiums to fund retirees, is vulnerable to fluctuations in birth rates, migration, and economic performance.

A study prepared by WIFO for the Association of Austrian Insurance Companies (VVO) suggests integrating a capital-accumulation model. This would involve investing a portion of employee pension premiums into capital markets to build long-term reserves. Experts noted that scientific studies suggest a capital-based component could ideally comprise 50% to 70% of pension security.

Felbermayr cited the Swedish model as a potential example, where state pensions are supported by capital market elements and adjusted according to life expectancy. He noted that Austrians tend to be overly cautious regarding capital markets, often preferring bank accounts, savings accounts, or real estate for their holdings.