The Austrian pension system

When retiring in Austria, you will find that pensions are generous even when compared to the country’s closest EU neighbors. This is thanks to Austria’s robust social security system which makes it a desirable place to retire for expats.

To help you understand the pension system in Austria, this helpful guide includes the following information:

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The Austrian pension system

Impressively, the international Social Protection Platform reports that Austria has 100% coverage of the elderly in terms of pension recipients who reach the legal retirement age. The Federal Ministry – Social Affairs, Health, Care, and Consumer Protection oversees the pension system in Austria.

There are three parts to the pension system in Austria: state pensions, occupational pensions, and private pensions. Within the system, there are two types of pensions: contributory and non-contributory. Employers will subtract a percentage of the gross income as an employee’s contribution. They will then add a percentage as an employer’s contribution. Certain individuals will also benefit from added government contributions; for instance, those in the military or caring for relatives with certain needs.

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According to an Austrian economist, the aging population of the country, coupled with longer lifespans and a decreased birthrate, will create financial issues for the government. Suggestions to safeguard the system include raising contributions and raising the age of retirement. However, as it stands, Austria’s pension system is considered to be generous by international standards.

Who is eligible for pensions in Austria?

The pension age in Austria

Currently, the retirement age in Austria is 65 years for men and 60 years for women. However, over the next decade the government will harmonize the retirement age for men and women to 65.

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In essence, early retirement is possible for people who have accrued enough contributory years. To qualify for a pension, the minimum number of contributory years is 15. However, there is a financial penalty if you decide to cash in before the official retirement age. On the other hand, those who work beyond the standard retirement age will receive a bonus.

Who can claim a state pension in Austria?

State pensions in Austria link directly to employment. Therefore, whether or not you are Austrian matters little in terms of qualifying for a pension. In fact, approximately one in every five employees in Austria was born elsewhere. As long as you meet the above age and number of contributory years, you can claim your pension in the country.

Pensions in Austria for expats

When moving to Austria from anywhere in the EU, it is very simple to transfer your existing state pension over to a bank in Austria. In the EU, employees only pay social security contributions in one country. Essentially, your place of work and country of residence will decide which country’s system applies. If you are in the UK, you can currently still get annual increases as well. If you want to look at your options in the UK, see below for our section on QROPS.

Several countries outside of the EU have social security agreements with Austria. However, many of these, such as the United States and Canada, only cover pensions specifically. Meanwhile, other countries, including Australia, Serbia, and Israel, have comprehensive social security agreements in place. Again, these link to employment within Austria.

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According to The Local Austria, experts from Austria’s Ministry of Social Affairs and the European Centre for Social Welfare Policy and Research claim that foreigners are actually, for a large part, financing the pension system. This is due to the typically younger age of foreign residents (the majority of which are under 50) contributing to social security in the country and paying in more to the system than they claim back.

QROPS: transfer and consolidate your UK pension

If you are moving to Austria from the UK, you may be able to transfer your pension into a Qualified Recognized Overseas Pension Scheme (QROPS). These are specifically designed to allow expats to consolidate pensions together into one plan to manage retirement funds more simply. It also protects again currency fluctuations and enables you to leave your fund to your heirs without losing any of it to UK tax after you die. Not all UK pensioners qualify for QROPS, so advice from an expert financial adviser such as AES is essential. You can read more in our guide to QROPS.

Austria pension rates and contributions

In Austria, employers subtract 10.25% of the gross income as an employee’s contribution. They then add 12.55% as an employer’s contribution. You can also take out voluntary unemployment insurance in Austria and choose between a monthly flat-rate contribution of either €89.78, €179.55, or €269.33. The Social Insurance Institute for Self-Employed Persons (SVS) is the best place to research this further, and ideally, you should contact an insurance advisor directly to discuss your options.

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You can also use a pensions calculator to get an idea of your own situation so you can better plan for your future. To clarify, benefits in Austria are calculated by using the 18 highest-paid years over a person’s career as well as the length of insurance contributions and retirement age.

Supplementary pensions in Austria

There are five options that employers in Austria can choose from when it comes to providing supplementary employee pensions, as follows.

Pensionskassen (pension funds)

For this, an employer sets up a pension fund as a legally separate entity in order to keep pension assets separate. There are multi-employer pension funds available so that smaller companies can make use of this. Up to 10% of contributions are tax-deductible for the employer and aren’t treated as taxable income in Austria. Employer-financed benefits are taxed as earned income, whereas only 24% of employee-financed benefits are taxed as income.

Betriebliche Kollektivversicherung (occupational collective insurance)

In essence, this form of old-age provision has a minimum interest rate, which is currently 0.5%. Therefore, a guaranteed pension amount is contractually fixed.

Converse to the pension funds, lower returns but higher collateral are to be expected. This form of supplementary pension essentially transforms a life insurance policy into a pension solution.

Internal book reserves

For book reserves, the employer acts as the pension institution. This is a legally binding pension promise. At least 50% of a company’s book reserves must be secured by government bonds. Book reserves are tax-deductible and not considered taxable income to the employee.

Unterstützungskasse (support funds)

Support funds are autonomous legal entities that don’t grant a legally enforceable right to the beneficiary. In addition, they may only grant very low benefits. Consequently, this funding vehicle is increasingly losing importance in Austria. You can’t make tax-deductible contributions to a support fund during active employment, and benefits are taxed as earned income.

Direct insurance

Direct insurance is when the employer pays premiums to a life insurance company. The benefits then go directly to the employee. About 10% of occupational pension scheme participants are covered by direct insurances. Premiums are tax-deductible for the employer. However, they are taxable income for the employee if they exceed €300 per person each year.

Private pensions

Finally, employees can take out a private pension. However, because public insurance is so broad, it is not the norm to do so. There are a host of private health insurance providers in Austria and the leading groups are Allianz Care and Cigna Global. There is also a large range of plans to choose from. Basically, the older you are, the more you will pay.

Non-contributory pensions and other support for low-income earners in Austria

Fortunately, low-income earners in Austria have guaranteed resources. The Organization for Economic Co-Operation and Development (OECD) categorizes Austria’s pension system as ‘targeted.’ This means that the system is set up to preferentially benefit poorer pensioners over those who are better off. As of 2019, the minimum standards were €885 for a single person and €664 per person for a couple. If this applies, you qualify for minimum resources. You will need to submit proof of income and statements of assets. You can do this at your district administrative authority where you live.

The Österreichische Gesundheitskasse (ÖGK) is the largest social health insurance company in Austria and offers insurance protection regardless of age or income.

Other pensions in Austria

Invaliditätspension (disability pension) is earnings tested. Essentially, this means that the loss of earning capacity must be greater than 50%. Additionally, a person must have at least 60 months of paid or credited contributions (plus one month for each month since age 50) in the last 10 years (plus two months for each month since age 50). Alternatively, they must have at least 300 months of paid or credited contributions, or a total of 180 months of paid contributions.

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The contribution requirements are lower for anyone over 60 years of age. The pension is subject to recovery if the insured’s monthly earnings exceed €1,196.09. Notably, you can have your disability pension paid to you from abroad.

Advice and support for pensions in Austria

When you are planning for your future – no matter your age – you should always consider all of your options. After all, you want to enjoy your golden years without worrying. With a little forward planning, you can put in the hard work when you are young and then live your senior years comfortably. Furthermore, seeking some financial advice is strongly advisable so that you can get the maximum pension provisions possible.

Useful resources

• Social security rights in Austria – European Commission guide on social security rights in Austria
• WKO – the professional association of pension funds in Austria
• The Organization for Economic Co-operation and Development (OECD) – an intergovernmental economic organization  
• Federation of Austrian Social Insurance Institution – a self-governing pensions institution with elected representatives of insured persons and employers
• Pension Insurance Institution – an institution that administers 85% of all pensions in Austria