New pension in Austria: how the exit will change from 2026

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With the new pension package, the federal government is planning a more flexible exit from working life: employees can reduce their working hours and draw a pension simultaneously through partial retirement.

The federal government has agreed on a comprehensive pension package, which is to be passed by the National Council in July. The core of the reform is the introduction of partial retirement, which will supplement partial retirement in the future and enable a more flexible exit from working life from 2026. This will allow individuals to continue working at a reduced rate while drawing a portion of their accrued pension benefits.

Partial retirement as a flexible solution for older employees
Partial retirement allows you to reduce your working hours by between 25 and 75 percent while at the same time receiving a corresponding portion of your pension. The prerequisite is an entitlement to an old-age pension. This new regulation enables many people to gradually retire from working life without relying on state subsidies. At the same time, the part-time employee continues to pay taxes and social security contributions—a “win-win situation” for the state and the employee, according to a press release from APA.

Sustainability mechanism as a statutory spending cap
To ensure the long-term financial viability of the pension system, a sustainability mechanism will be introduced as of 2030. NEOS parliamentary group leader Yannick Shetty explained at a press conference that this mechanism would set a statutory spending cap for the pension system. If the system is not sufficiently relieved by then, the government will have to take additional steps from a package of measures, such as raising the statutory retirement age.

Merging partial retirement and partial pension
The existing partial retirement, which involves a reduction in working hours of 40 to 60 percent and wage compensation, will be merged with the new partial pension. This will reduce the duration of the subsidy from five to three years. Partial retirement will only remain possible as long as no partial pension can be claimed or no pension entitlement exists.

Political reactions to the new pension package in Austria
The reform has met with mixed reactions: FPÖ social affairs spokesperson Dagmar Belakowitsch described the package as “blatantly anti-social” and accused the government of introducing a de facto increase in the retirement age with the sustainability mechanism. The trade union federation, on the other hand, welcomes the partial pension as a “major achievement” and a flexible way of keeping older employees in work for longer. However, the union misses more substantial incentives for healthy and long-term work. The Federation of Austrian Industries (IV) is calling for further structural reforms but sees the partial pension and the restriction of the corridor pension as sensible steps, provided they are practicable for companies. (APA/RED; 18.6.25)

What is the partial pension, and how does it work?
The partial pension in Austria allows employees to reduce their working hours by between 25% and 75% starting in 2026, while also drawing a portion of their already saved old-age pension. The prerequisite is entitlement to a regular old-age pension.

What are the advantages of partial retirement?
Partial retirement allows a flexible and gradual exit from working life without state subsidies. Part-time employees continue to pay taxes and social security contributions.

What is the sustainability mechanism?
A statutory spending cap for the pension system is to take effect from 2030. If sufficient savings are not made by then, the government will need to take measures such as raising the statutory retirement age to secure long-term funding.

How is partial retirement changing in Austria?
The previous partial retirement scheme (40-60% reduction in working hours with wage compensation) will be merged with partial retirement. The subsidy period will be reduced from five to three years. Partial retirement is now only possible if no partial pension is drawn or no pension entitlement exists.