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"This is a mixture of funded pension schemes that is too fragmented and none of which, apart from the life insurance, was created with the main aim to offer an effective retirement provision", Baumgartl said.
Baumgartl pointed out that Austrian Pensionskassen had been established to ease the burden of pension liabilities on large companies, that the state-subsidised private retirement provision had been set up – including a mandatory 40 per cent domestic equity quota – to support the domestic stock exchange, and that the severance funds had been created to get severance pay reserves off companies' books.
He even went on to suggest that the investment set-up for severance funds and state-subsidised private retirement provision"violated" the prudent person principle, as the former had to generate long-term returns while having to pay out funds on demand, while the latter had to offer guarantees on a 40 per cent equity quota.
Baumgartl also reiterated that the insurance industry had not won Pensionskassen business when it was established in the early 1990s because insurance companies offered discount rates that were "too low", which would have meant higher transfer payments for Austrian companies.
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