Transferring Austrian Pensions: What You Need To Know

Austria's pension system is considered to be generous by international standards, and it offers a desirable retirement location for expats. The country has a Three Pillar Model for retirement provision, with the first (public) pillar financed by tax and social insurance contributions, the second (occupational) pillar funded by employer and employee contributions, and the third pillar consisting of individual retirement provisions. Austrian pensions can be transferred directly to foreign bank accounts, but there are some considerations to keep in mind. For example, the official language of Austria is German, so any requests or applications sent to Austrian Social Security Institutions in a different language may not be dealt with immediately. Additionally, under EU law, pension periods earned in an EU Member State are considered for pension purposes, but they are not transferred or paid out to those whose insurance cover in the relevant country has ended.

Transferring Austrian pensions to foreign bank accounts

Austria's pension system is considered generous by international standards, and it covers 100% of the elderly in terms of pension recipients who reach the legal retirement age. The retirement age in Austria is currently 65 years for men and 60 years for women, but the government plans to harmonize the retirement age for men and women to 65 over the next decade. To qualify for a pension, you need a minimum of 15 contributory years, and at least 180 covered months to receive an Austrian state pension.

Austrian pensions can be transferred to foreign bank accounts. The Austrian Pension Fund can transfer pensions (retirement benefits) directly to the foreign bank account of the individual receiving the pension. An application is required, and the official language of Austria is German, so any application or correspondence with Austrian Social Security Institutions should be in German.

If you have an Austrian bank account, you can make cashless payments in euros from this account to any account covered by the SEPA system, which includes all EU member states, as well as EEA members Iceland, Liechtenstein, and Norway, and non-EEA countries Andorra, Monaco, San Marino, Switzerland, the United Kingdom, and Vatican City State. For payments within the EEA, you must provide the recipient's IBAN (International Bank Account Number). For payments to all other countries, you need to provide both the IBAN (or bank account number) and the BIC (Business Identifier Code).

It is worth noting that banks are prohibited by law from charging higher fees for cross-border transfers in euros than they would for domestic transfers. However, if the payment is in a different currency and needs to be converted, a fee may be charged for the conversion.

Austria's pension system compared to Germany's

Austria's pension system is considered generous by international standards. The country's robust social security system makes it a desirable place for expats to retire. The Austrian pension system is divided into three parts: state pensions, occupational pensions, and private pensions. Within the system, there are two types of pensions: contributory and non-contributory. Employers deduct a percentage of the gross income as an employee's contribution and then add their own contribution as employers.

The retirement age in Austria is currently 65 years for men and 60 years for women. However, over the next decade, the government plans to harmonise the retirement age for both men and women to 65. To qualify for an Austrian state pension, one needs at least 180 covered months. The early retirement age is achievable for people who have accrued enough contributory years, with a minimum of 15 years.

Austria's pension system has undergone numerous reforms to further develop and stabilise state pensions. In 2005, the "pension account" legislation was introduced, with the fundamental goal of ensuring that the state pension system protects people's standard of living. The target for state pensions in Austria is based on the 80/45/65 rule: a gross replacement rate of 80% for people who have paid 45 years of social security contributions and retire at 65.

On the other hand, Germany's pension system has taken a different path. The country's pension reforms around the turn of the millennium sought to reduce the benefit level of state pensions and rely more on funded private pensions. This has led to sharp criticism as Germany's pension system often fails to provide a secure retirement for its citizens. The German state pension replacement rate has been cut to reduce non-wage labour costs, transferring part of the responsibility for pensions and their funding to private individuals.

A comparison between the two countries reveals that Austria's pension system contributes significantly more to securing a higher standard of living for retirees. According to a study by the Scientific Service of the Bundestag, despite similar contribution rates for employees, Austrian pensioners receive a statutory pension that is significantly higher per equal average income. In Germany, the pension amount is determined by the affordable contribution rate for the contributors. As a result, a model German pensioner who has contributed for 45 years receives a standard pension of 48% of the average gross income, while their Austrian counterpart receives around 80% of their average lifetime income.

The difference in pension systems also affects the overall pension levels. In Austria, the average pension fund paid €1,678 for men and €1,028 for women. In Germany, the average statutory pension in 2019 was €1,148 per month for men and €711 for women. Additionally, Austria has a minimum pension, which is €1,136 per month after 30 years of contributions, while nobody receives less than €966. Austrians can also retire earlier, with men retiring at 63 on average and women at 60, compared to 64 in Germany for both men and women.

The contrasting approaches of Austria and Germany to their pension systems have had notable impacts on the standard of living for retirees and the economic development of the countries. Austria's commitment to maintaining a strong welfare state and not imposing restrictions on wage increases has resulted in better economic performance and a higher standard of living for its retirees.

Early retirement in Austria

Austria's pension system is considered generous, even when compared to its closest EU neighbours. The system is robust, with three parts: state pensions, occupational pensions, and private pensions. Within the system, there are two types of pensions: contributory and non-contributory. The state pension takes precedence over the other two.

The retirement age in Austria is currently 65 for men and 60 for women. However, the government plans to standardise the retirement age for both men and women at 65 over the next decade. Early retirement at 62 was an option until 2017, but this has since been discontinued.

To qualify for a pension in Austria, you must have paid contributions for a minimum of 15 years (180 months). The longer you pay, the higher your income replacement ratio. If you pay into your pension for 45 years, you can receive up to 80% of your average lifetime income while retired. This is known as the 45-65-80 rule.

While early retirement is no longer an option, it is possible for those who have accrued enough contributory years. However, there is a financial penalty for cashing in before the official retirement age. On the other hand, those who work beyond the standard retirement age will receive a bonus.

State pensions in Austria are directly linked to employment. Therefore, whether you are a citizen or not, you can claim a state pension as long as you meet the age and contributory requirements.

Austria has social security agreements with several countries outside the EU, including the United States, Canada, Australia, Serbia, and Israel. These agreements are linked to employment within Austria.

If you are moving to Austria from another EU country, transferring your existing state pension to an Austrian bank is straightforward. Employees within the EU only pay social security contributions in one country, and your place of work and residence determine which country's system applies.

For those moving from the UK, it may be possible to transfer your pension into a Qualified Recognised Overseas Pension Scheme (QROPS). These schemes are designed to allow expats to consolidate their pensions into one plan, protecting against currency fluctuations and enabling you to pass on your fund to your heirs without losing a portion to UK tax.

Pension age in Austria

The pension age in Austria varies for men and women. The standard retirement age for men is 65, and it is 60 for women. However, the retirement age for women will be raised by six months each year from 2024 until 2033 until it is the same as for men. So, from 2033, the retirement age for both men and women will be 65.

To qualify for a pension, the minimum number of contributory years is 15. However, there is a financial penalty for those who decide to retire before the official retirement age. On the other hand, those who work beyond the standard retirement age will receive a bonus.

The Austrian pension system is divided into three parts: state pensions, occupational pensions, and private pensions. Within the system, there are two types of pensions: contributory and non-contributory. Employers will subtract a percentage of the gross income as an employee’s contribution. They will then add a percentage as an employer’s contribution. Certain individuals will also benefit from added government contributions, for instance, those in the military or caring for relatives with certain needs.

Calculating Austrian pensions

The Austrian pension system is divided into three parts: state pensions, occupational pensions, and private pensions. Within the system, there are two types of pensions: contributory and non-contributory. Employers will subtract a percentage of the gross income as an employee’s contribution, and then add a percentage as an employer’s contribution. Certain individuals, such as those in the military or caring for relatives with certain needs, will also benefit from added government contributions.

To qualify for a pension, the minimum number of contributory years is 15. However, there is a financial penalty if you decide to cash in before the official retirement age. On the other hand, those who work beyond the standard retirement age will receive a bonus.

The retirement age in Austria is currently 65 years for men and 60 years for women. However, over the next decade, the government will harmonize the retirement age for men and women to 65. The standard old-age pension is a continuous cash payment intended to provide financial security at the end of normal working life.

The amount of the standard old-age pension is calculated based on the claimant's age, length of insurance, and the amount of contributions paid. For persons under the age of 50 as of January 1, 2005, a benefit-defined pension account system based on current-income financing is in force. Under this system, pension entitlements acquired are calculated each year, with the basis for calculation being the average income in a calendar year, subject to a ceiling (maximum contribution base). For each calendar year, 1.78% of this amount is credited to the pension account.

For persons who had reached the age of 50 by January 1, 2005, the legislation applicable by the end of 2003 still applies. The pension calculation basis is the average income of the 36 best insurance years. This period will be gradually increased to 40 years of insurance by 2028. For each insurance year, 1.78% of the calculation basis is credited to the pension account.

In addition to the standard old-age pension, there is also the option of early retirement pension, which is a continuous cash payment provided before the normal retirement age. The early retirement pension includes the corridor pension, heavy-labour pension, and other forms for individuals born in certain years.

The Austrian pension system is considered generous by international standards, with 100% coverage of the elderly in terms of pension recipients who reach the legal retirement age. However, suggestions to safeguard the system include raising contributions and increasing the retirement age.

Frequently asked questions