At 29.5 billion euros, almost a quarter of the entire federal budget goes to pensions. For comparison: 11.5 billion euros are spent on education. “Without structural reforms, the financial burden on pensions will continue to rise until the mid-2030s,” says university professor Martin Halla. He analyzed the situation in Austria in a study: Women and men in this country retire significantly earlier than in other EU countries (see graphic). The gap between the legal and actual retirement age is considerable: men retire at 61.6 years old (as of 2022), the legal retirement age is 65.
In 2022, 54.4 percent of men took advantage of early retirement, which includes corridor, long-term insurance and hard work pensions. For the first two models, a minimum age of 62 and 40 or 45 years of insurance are required. The annual discounts are 5.1 and 4.2 percent respectively.
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“For many people, the trade-off between more free time and a higher pension often seems to be in favor of free time,” says Halla. If Austrians worked a year longer before retiring, it would save the state 2.5 billion euros.
“We are at the top when it comes to part-time work and early retirement,” says Doris Hummer, President of the Upper Austrian Chamber of Commerce. This cannot be achieved if the working population is shrinking at the same time. The employment rate of 55 to 64 year olds in Austria was 57.3 percent in 2023, well below the EU average of 63.9 percent. At the top of the statistics are Sweden (78), Estonia (76) and the Netherlands (75), ahead of Germany. There must be incentives against early retirement – except in the case of illness-related restrictions, says Hummer.
The minimum starting age of 62 is to be gradually raised by one month from 2027. “Pension candy” should be prevented: According to Hummer, it must be stipulated in law that pension increases will only be compensated for inflation. Anyone who voluntarily leaves their working life earlier should accept higher deductions. Studies have confirmed that this measure works, says Halla. He would welcome an automatic mechanism to adjust the statutory retirement age to the increased life expectancy.
In addition to the economic impact, early retirements are also a major challenge for companies, says Erich Frommwald, chairman of the industry division. As a survey of HR managers in 55 industrial companies conducted by the Chamber revealed, financial and health aspects play an important role in the decision to retire early. Women report family obligations (grandchildren or relatives in need of care) more often than men. For employees, the excessive demands caused by increasing digitalization are a reason to say goodbye to working life earlier.
With further training or models for reducing working hours, companies could retain experienced employees for longer, says Frommwald. In his company, ten to fifteen percent of the workforce are also “baby boomers” and are about to retire: “Too few are coming along.” The proportion of people over 65 years of age will increase from today’s 19.5 percent to 26.6 percent increase in 2040.
