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EXPLAINED: How does the Austrian pension system work?

EXPLAINED: How does the Austrian pension system work?
How comfortable is an Austrian pension? Photo by Huy Phan on Unsplash
Already living and working in Austria? Or planning to retire in the Alpine Republic in the future? Here’s what you need to know about the pension system.

Austria is known for having a strong social security system and a generous pension plan.

This makes it an attractive place for people to retire – whether they have already lived and worked in the country or not.

How does the Austrian pension system work?

Austria has a compulsory pension system for all employed people, including those that are self-employed.

The pension age in Austria is 65 for men and 60 for women, but there are plans for the Austrian government to raise the pension age for women to 65 by 2033.

However, to qualify for a state pension, you need to contribute to the Austrian welfare system for 15 years – usually through employment.

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Early retirement is possible, as long as you have contributed for 15 years, but pension payments will be smaller until the age of 65.

Alternatively, people can receive a bonus for working past the statutory retirement age.

Austria pension rates and contributions

In Austria there are three pillars to the pension system: state, occupational and private. 

Then there are two types of pension: contributory and non-contributory.

Contributory means employees pay a percentage towards their pension out of their salary, followed by another percentage from the employer.

Some people are also eligible for government contributions, such as military personnel or those caring for relatives.

The Austrian pension system is basically a pay-as-you-go scheme with 10.25 percent of an employee’s gross salary paid towards pension contributions.

Employers then contribute a further 12.55 percent towards an employee’s pension.

For self-employed people in Austria, pension contributions are part of the overall social security payments to the Social Insurance Institute for Self-Employed Persons (SVS).

State pensions

The state pension in Austria is a statutory old-age pension and is known as the first pillar in the Austrian pension system.

Anyone can claim a state pension in Austria as long as they meet the required age and the number of years of contributions within the country.

But the amount a person receives depends on how much has been paid into the individual pension account. 

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The total in the pension account is made up from contributions through employment, periods of partial insurance and voluntary insurance payments.

An individual pension account can be viewed online with a citizen card or a Handy-Signatur via the FinanzOnline website or by contacting your pension provider.

Occupational pensions

Since 1990, Austria has had its own labour laws for company pension schemes, known as the Company Pension Act.

Occupational pensions (second pillar) are not mandatory and involve making additional contributions. They are designed to help people continue with a certain standard of living into retirement.

With occupational pensions, there is typically a vesting period of up to three years. After this time, the employee contributions are preserved.

Private pensions

Private pensions, or the third pillar, were introduced in Austria in 2003 to promote private investments for retirements, as well as the Austrian capital market.

This type of pension is typically offered by way of annuity insurance and pension investment funds.

Since 2009, for people up to the age of 45, the share quota of the plans has been 30 percent. There is then a reduction of the share quota based on the age of the contract holder (known as the life cycle model).

For example, for people between the age of 45 and 55, the share quota is 25 percent. But from the age of 55, the quota is 15 percent.

Pensions from other countries

As Austria is an EU member state, this means people can transfer a state pension from another EU country to a bank in Austria.

However, the amount you receive will depend on the rules in the country that pays the pension.

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Austria also has social security agreements with countries outside of the EU, such as the US, Canada, Australia, Serbia and Israel, with most agreements linked to employment in Austria.

For people from the UK, there is the option to transfer a pension into a Recognized Overseas Pension Scheme (ROPS), which allows pension funds to be consolidated together into one plan.

But as with all things related to finance, it’s recommended to seek advice from a financial expert when it comes to moving pension pots overseas.


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