November 7 is ‘Pension Gap Day’. Because all payroll taxes that the federal government collects so far will go to pensions. Fewer and fewer people with jobs have to finance more and more seniors. Agenda Austria warns: Without reforms, costs will continue to explode.
The state will inject approximately 30 billion euros into the pension system this year. Because the contributions are nowhere near enough to finance it. “Every fourth euro of the budget goes to this,” says economist Dénes Kucera of Agenda Austria in an interview with “Krone”. Even by the OECD average, this places a huge burden on the federal budget and limits other spending.
November 7 is ‘Pension Gap Day’
Today, November 7, is also ‘Pension Gap Day’. If you compare the costs with the income tax revenues, all the taxes paid by employees and pensioners to this day only go to safeguard the pension system. This corresponds to 85 percent of payroll tax revenue. “This day is being pushed back further and further because the subsidy is increasing,” said the expert.
In 2028, this is expected to rise to 36.7 billion euros (see graph). This year alone, subsidies for pension insurance will increase by almost 30 percent, and expenditure on civil servants’ pensions by 10 percent. Many baby boomers are now retiring.
However, the problem of exploding subsidies will not disappear by itself; a pension reform would be necessary even if it does not restore the budget in the short term. Above all, Kucera advocates an increase in the actual retirement age and an automatic adjustment of the statutory retirement age to life expectancy. Currently, an average of 1.7 employees finance a retiree; in 2050 this will be 1.3.
Qualified immigration can stabilize the system
To finance the system, Austria will also need immigration, given the low birth rates, so that there are still enough working people. Strengthening corporate and private pension provision would also reduce the burden on the state. Greater integration of the capital market (“stock pension” as in Sweden) could also alleviate pressure on the state budget in the long term.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
