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Schiendl's solution was "to modify the liability side" of pension funds. He also called on actuaries to "be a bit more creative" in plan designs. "We have to go back to the beginning of plan design and organise plan members differently, dividing the portfolios into retired and active members", he said. Schiendl pointed out that the equity hedging that must be applied to mixed portfolios at the VBV – to "minimise short-term losses for the sake of pensioners" – cost 8-9 per cent of the fund's asset value.
All of Austria's pension funds will have to follow under new regulations recently introduced in the country. But, according to Schiendl, the biggest problem remains the existing contracts, some of which have been set up assuming a 6 per cent discount rate that "cannot be reached" in the current environment and subsequently cause frequent pension cuts. He confirmed that the VBV was "negotiating changes", but acknowledged that not all of its members were convinced they were the right thing to do.
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