The Austrian Trade Union Federation (ÖGB) has raised concerns over Chancellor, Christian Stocker’s, proposals for reforms to pension provision and wealth accumulation for young people.

The organisation warned that while a sovereign wealth fund could supplement the public pension system, it must not undermine the pay-as-you-go system.

Under the proposals, a ‘future investment portfolio’ would be established for young people, which would aim to support long-term wealth accumulation for younger generations through capital market investment, including tax advantages.

ÖGB argued that the future investment portfolio would primarily benefit families that can afford to save up to €5,000 per child per year.

“Pensions are not a bet on the stock market,” said ÖGB federal managing director, Helene Schuberth.

“The pay-as-you-go system is the reliable foundation of our pension system and must not ultimately be undermined by capital market models."

ÖGB added that Stocker had not explained how both models could be financed amid a ‘difficult budgetary situation’.

The future investment portfolio is set to be financed with around €700m a year from dividends from state-owned organisations, with capital of approximately €100bn to be built up over 30 to 40 years.

"What flows into the fund must be saved elsewhere in the budget, replaced by additional revenue, or financed through increased debt," said Schuberth.

ÖGB also argued that the idea of securing the pensions of today’s young people with a capital stock fell short, stating that high employment, wages, and productivity would be crucial to funding pensions in the future.

"Our public pension system is efficient and financially sustainable in the long term,” Schuberth added.

“Anyone who wants to give young people security should strengthen this system instead of making their pensions more dependent on the fluctuations of the financial markets."

ÖGB called for the pay-as-you-go system to remain the basis of the public pension system, for the future investment portfolio to not be financed by savings at the expense of workers or pensioners, and for the portfolio to not become a tax advantage for the wealthy.

The proposals were previously welcomed by Austria’s banking and insurance sector, which argued that the capital market should play a greater role in long-term saving and retirement provision.

---