Direct Request (CEACR) - adopted 2008, published 98th ILC session (2009)

Article 17(a) in conjunction with Article 26 of the Convention. According to the calculation given in the report, the old-age pension of the standard beneficiary after 30 years of insurance in 2002–03 exceeded 45 per cent but in 2004 and 2005 attained, respectively, only 43.3 per cent and 43.7 per cent of the reference wage of the skilled manual male employee determined under Article 26(6)(c) of the Convention. The Committee would like the Government to explain the reasons for the decrease in 2004–05 in the replacement level of the old-age pension. It also asks the Government to calculate the replacement rate for the years 2006 and 2007, indicating how this calculation is made for the standard beneficiary (man with wife of pension age) and whether, in addition to the pension, account could be taken of the compensatory allowance for a married couple.

Article 29, paragraph 1. (a) The report indicates that, since 2004, the pensions have been adjusted on the basis of inflation, which means that pensions are increased in line with increases in consumer prices. This inflation-based adjustment has replaced the previous system of net adjustment introduced in 2001, according to which average pensions were adjusted in line with the average income of the working population. However, due to a structural effect (tendency for low pensions to disappear, growth in higher pensions), the required harmonization of the average values led to adjustments that were frequently below the rate of inflation. The Committee recalls that Article 29(1) of the Convention provides for both methods of adjustment of pensions linking them to changes in the cost of living as well as to changes in the general level of earnings of the working population, without opposing one method to the other. In fact, they are treated as complementary: the first method, market-based, permits to maintain the purchasing power of pensions vis-à-vis the inflation and fluctuation of market prices, the second, solidarity-based, ensures that pensioners share in the increase of the general standard of living of the working population. The ability of the national pension system to maintain both principles of adjustment of pensions is an important indicator of the financial health of the system and its contribution to the sustainable social development and social cohesion in the country. Adjusting pensions to the cost of living alone, while safeguarding the standard of living of the pensioners against sliding into absolute poverty, would not prevent them from experiencing relative poverty as their pensions would progressively lag behind the growth of the average income of the working population. In this respect, the statistical data provided in the report shows that the standard wage index reflecting growth of the average income of the working population has increased by 15.2 per cent surpassing the cost of living index, which in the same period of 2000–06, grew by 12.2 per cent. This implies that in this period pensioners in Austria might have been better off had their pensions been adjusted in line with the standard wage index according to the old system of net adjustment. Taking into account that the system of net adjustment was introduced since 2001 and the system of inflation-based adjustment since 2004, the Committee would like the Government to include in its next report detailed statistics requested under Article 29 of the report form on the evolution of the cost of living index and the standard wage index for the whole period of 2001–07.

(b) The Committee also notes that, compared to the 12.2 per cent increase of the cost of living index, the average old-age pension under the ASVG in the period of 2001–06 grew by 10.1 per cent and the old-age pension of the skilled manual male worker after 15 years of contributions – by only 5.8 per cent, thus apparently lagging far behind the level of inflation in the country. For 2007, the report mentions payment of the difference between the consumer price index and the “price index for pensioner households” to all beneficiaries by means of a socially differentiated lump sum payment. The Government is asked to explain the situation in the period of 2001–06, the use of the price index for pensioner households, which apparently does not match the consumer price index, and the effect of the lump-sum payment on pensions of different amounts. The Committee expects the Government to show, on the basis of updated statistics for the period 2004–07, that the increase in the cost of living and consumer price index has been effectively compensated by the inflation-based adjustment system.

(c) The report mentions time limited special provisions for adjustment of higher pensions. In 2004 and 2005, all pensions that fell short of the average old-age pension in the country were adjusted on the basis of consumer price increases, all other pensions – by a fixed amount. Taking into account that the pension for a standard beneficiary with 30 years of contributions would normally be higher than the average old-age pension in the country, these measures would result in insufficient rate of adjustment of the pensions guaranteed by the Convention. In 2006 and 2007 adjustment to inflation was effected only for pensions up to the amount of half the maximum contribution basis, that is for pensions up to 1,875 euros; for higher pensions it was again replaced by the payment of a fixed amount. As the pension for a standard beneficiary with 30 years of contributions does not attain the amount of half the maximum contribution basis, it would have been fully adjusted to inflation during this period. The Committee would like the Government to include in its next report exact statistics on:

–           the level of inflation and adjustment of pensions in 2004–05, separately for pensions up to, and above, the amount of the average old-age pension in the country;

–           the level of inflation and adjustment of pensions in each year since 2006, separately for pensions up to, and above, the amount of half the maximum contribution basis; and on

–           the rates of adjustment applicable in each year since 2004, to the pension for a standard beneficiary with 30 years of contributions.