Pension system in Austria – First changes under review

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The pension system will undergo some changes starting next year. On Friday, the first changes will be reviewed—namely, the corridor pension and the allocation of the first pension adjustment. A partial retirement and a sustainability mechanism are also being worked on. The ÖVP and NEOS party leaders presented the roadmap without the Social Democrats. However, all three parties emphasized that this does not indicate a rift in the government.

NEOS party leader Yannick Shetty spoke to journalists about the “biggest pension reform in 20 years.” This was necessary to keep the pension system functioning, said ÖVP parliamentary group chairman August Wöginger. People should be kept in employment for longer. There are currently 2.5 million pensioners; by 2045, there will be around 3.25 million. According to Shetty, the pay-as-you-go system – the financing of pensions through the contributions of working people – would no longer be sufficient, and 30 billion euros would have to be added every year. This would eliminate the scope for future issues, such as education.

Increased retirement age for the corridor pension, partial pension coming
From 1 January 2026, the earliest possible retirement age for the corridor pension will gradually increase from 62 to 63, and the required years of insurance will increase from 40 to 42. The values will increase by two months in quarterly increments until the target is reached. From 2029, the savings should amount to one billion euros per year.

Although it has not yet been submitted for review, the National Council will decide in July, and partial retirement will be made possible at the beginning of 2026. If you are entitled to an early retirement pension, you can take 50 percent of your pension and continue to work at 50 percent, explained Wöginger. “This should result in a total of 100 percent.”

The partial pension is a “win-win situation” for people as well as the tax and pension system, said the ÖVP party leader. A 63-year-old man who earns 4,000 euros gross and chooses the partial pension would earn around 350 euros more than in the corridor pension, assuming a reduction in working hours by half. The pension from the statutory retirement age of 65 would also be higher.

Sustainability mechanisms should oblige the future government
For Shetty, the statutory sustainability mechanism the government wants to adopt this year is the most crucial point. If it is impossible to meet specific targets, which are still being defined, with the steps taken, further measures for the pension system will have to be taken. A future government will be given a “bundle of measures to choose from,” said Shetty, mentioning new adjustments to the corridor pension. He noted that the NEOS would prefer a change in the retirement age rather than a reduction in pension benefits. If the regulation could be adopted as a constitutional provision – with the help of the Greens or the FPÖ – they would do so.

In addition, the aliquot – the adjustment of pensions in the first year – should be 50 percent from 2026, regardless of the month of retirement. The increase in health insurance contributions for pensioners from 5.1 to 6 percent is also set to come into force on June 1.

The government also wants to create an incentive and monitoring system for employing people over 60. “Elements that reduce non-wage labor costs” are to be used more specifically, according to Wöginger. The monitoring is intended to determine how many people over 60 are employed in which sectors.

“No foul play” within the coalition
The absence of Korinna Schumann, the Social Democratic Party’s Minister of Social Affairs, was conspicuous during the background discussion. This was not an expression of discord, emphasized the club chairman; the three-party coalition had agreed on everything. Shetty admitted that the format raised questions, but at the same time recalled that only recently, a first measure in the pensions sector – the inclusion of care workers in the heavy labor scheme – was presented without the NEOS. APA also reported that the Ministry of Social Affairs would have liked to have given the innovations once they were ready to be implemented. However, there had been scheduling problems, and it was “not a foul” by the coalition partners.