The priority task of pension systems is to ensure good and reliable protection in old age, even under difficult demographic conditions. The reliability of the promised pension benefits presupposes confidence in the viability of the pension system (financial sustainability). In order to assess the long-term sustainability of public finances in the EU member states, the Economic Policy Committee (EPC), together with the EU Commission (Directorate-General ECFIN), has been producing a report every three years since 2006. The Ageing Report provides long-term projections of age-related expenditure (pensions, health, long-term care and education) for EU member states (and Norway) up to 2070, based on current population projections. In May 2024, the Council adopted the relevant Council conclusions.

Austria can rely on a financially viable pension system
For Austria, the 2024 Ageinig Report shows that pension expenditure in the main scenario will increase only slightly in relation to GDP by 2070, although the share of older people is increasing significantly. Over the next ten years, due to the baby boomers entering into retirement, expenditure will moderately increase for the time being and then quickly decline again. According to the Ageing Report, after the baby boomer peak, expenditure on public pensions is settling at 14% of GDP at a level that is only slightly higher than that of around 10 years ago; and it will stay there in the long term. Thus, all horror scenarios of an “insolvent” pension system are rendered absurd. Even more clearly than before, it is confirmed that the long-term financial viability of pensions in Austria is not endangered in any way, despite very good pension levels by international standards, but is in a very solid position. Austria is therefore very well prepared for the challenge of an ageing society.

Ageing societies, adequate pensions and “financial sustainability”
The assessment of financial sustainability is ultimately a political issue. Ensuring financial sustainability requires curbing the demographically induced increase in expenditure while at the same time ensuring adequate pensions to a socially acceptable extent. From the AK's point of view, it certainly does not require public pension expenditure to be reduced below current levels despite a population which is significantly ageing. Rather, in view of the extent of population ageing, it should not be disputed that a slightly larger piece of the (growing) total cake must be reserved for the significantly growing group of older people in the future. The demographic projection underlying the current Ageing Report for the period up to 2070 assumes that this population group will increase by a considerable 64% (compared to 2013). Against this background, discrediting any moderate increase in public pension expenditure as an expression of “lack of financial sustainability” has no objective justification.

Inclusive strategies needed
From AK's point of view, inclusive strategies to further promote adequacy and sustainability are needed rather than cuts in spending on public pensions despite massive ageing. From 2012 to 2019, the EU Commission recommended Austria year after year (except for 2017) to increase the statutory retirement age in line with the increasing life expectancy (pension automation) under the pretext of financial sustainability. AK has always strongly rejected this recommendation and welcomes the fact that it has not been put forward since 2020. The respective Austrian governments have also made it persistently and unequivocally clear that for the long-term protection of the pension system, the focus is not on raising the statutory, but the actual retirement age. This is once again impressively demonstrated by the Ageing Report: While a linking to life expectancy would mean that public pension expenditure would be significantly lower than current levels in the long term despite significant ageing, inclusive strategies aimed at higher employment rates would both promote adequacy and significantly curb the temporary increase in expenditure due to demographic factors. Should the EU Commission nevertheless recommend a pension automation again in the future, this would not be comprehensible.

Right to adequate pension benefits 
Principle 15 of the European Pillar of Social Rights reaffirms the right to adequate pensions. Adequacy is a central pension policy objective to be considered in conjunction with sustainability. The Pension Adequacy Report focuses on this important aspect. It is published every three years by the Social Protection Committee (SPC) together with the EU Commission (Directorate-General EMPL). The report analyses the extent to which EU member states’ pension systems ensure adequate retirement income, i.e. prevent old-age poverty and safeguard income for the duration of retirement. According to the latest edition of the report, the risk of poverty and social exclusion for older people in the EU has continued to increase since 2019. The Council adopted Council conclusions on the report for the first time in June 2024. For Austria, the report states that there is a very good level of security in international comparison, even for those who are still younger today.

Outlook
Over the past 30 years, pension reforms have mostly focused on financial sustainability and curbing expenditure growth resulting from ageing populations. The important aspect of adequacy often faded into the background. This has led to lower pension replacement rates across the EU and, in many cases, to an increase in the statutory retirement age. From AK's point of view, however, the focus should rather be on labour market integration. There is a need for inclusive overall strategies aimed at improving employment opportunities across all working ages and, in particular, for disadvantaged groups such as women, the elderly, the low-skilled or people with a migrant background. The consistent use of existing employment potential would not only promote the adequacy and sustainability of pensions in equal measure, but also significantly improve the lives of millions of EU citizens.

Further information:
EU Commission: Ageing Report 2024
EU Commission: Pension Adequacy Report 2024
A&W Blog: Und wieder einmal: Pensions-Schwarzmaler:innen durch aktuelle EU-Projektionen klar widerlegt (German only)
AK EUROPA: Labour markets’ primary importance for pensions’ adequacy and sustainability
AK EUROPA: New ETUC study: How would the implementation of the European Pillar of Social Rights Action Plan affect pensions?
AK EUROPA: The Future of Pensions in Europe