Austria is reforming its pension provision at the turn of the year. In the future, every child born from January 1, 2027 will be entitled to start-up capital for a so-called “future deposit”. The “active pension” starts on the same day for everyone who works beyond retirement age. The National Council and Federal Council have already decided to expand company pension schemes. “A lot has happened in the meantime,” says Finance State Secretary Barbara Eibinger-Miedl (ÖVP) in an interview with Handelsblatt.
There is a lot of catching up to do. According to a comparison by your company, Austria is the only one of 32 European countries that does not provide any form of tax relief for long-term securities savings. Capital gains tax of 27.5 percent is due on gains from the first euro. Austria must change from a “country of savers to a country of investors,” says Eibinger-Miedl.
In the future, all Austrians should become investors from birth. This can be seen in a government paper that sets out the key points of the future depot and is available to the Handelsblatt. The state pays a one-off amount of 500 euros into the deposit, with no income limit. Parents, grandparents and others are allowed to deposit up to 5,000 euros per year. Investments are made in regulated funds and ETFs with a maximum of one percent running costs or in the federal treasury, a form of investment guaranteed by the state.
At 18, the child can withdraw the entire portfolio value tax-free. This also applies to children who have already been born, but without a starting bonus. According to Eibinger-Miedl, the entry fee costs around 40 million euros per year, and the Ministry of Finance estimates the tax loss to be around 20 million euros per year in the medium term.
But money is tight in Vienna. EU deficit proceedings are ongoing against Austria. The country must present Brussels with a path to reducing the government deficit and report regularly on progress.
A late start
Eibinger-Miedl speaks of a fundamental agreement that Finance Minister Markus Marterbauer (SPÖ) also supports. In September, his department considered the start at the turn of the year to be “practically impossible”. It wasn't entirely wrong. According to the paper, the depots can only be opened from July 1, 2027. If you don't open an account for your child, you still won't lose the bonus. The 500 euros will then be invested in the federal treasury with the entire year.
However, the full tax savings can only be achieved by those who fully exploit this upper limit for 18 years, i.e. who pay a total of 90,000 euros. The trade union-affiliated Momentum Institute considers the model to be regressive because it favors high earners. Eibinger-Miedl counters: "We consciously decided on a limit. The state starting capital is the same for all children." According to a model calculation by the Chancellery, a family that pays the full 5,000 euros every year saves around 23,700 euros in capital gains tax over 18 years.
The company pension scheme shows how big the gap is, which is to be gradually closed with the measure. Funded pension assets in Austria are around seven percent of economic output and in Denmark around 200 percent. When it comes to the statutory pension – this is what the pension is called in Austria – the government is again relying on incentives. Anyone who works beyond retirement age will receive a tax allowance of 1,250 euros per month from January and will no longer pay contributions to pension insurance.
Each additional month at the actual starting age, which is currently around 62, brings in almost 200 million euros, says Eibinger-Miedl. The Momentum Institute warns of deadweight effects. The people who would particularly benefit are those who continue to work in retirement anyway, without this leading to more older people being employed.
Further reforms “were not included in the government program,” says the State Secretary. In addition to the political scope, the financial scope is also limited. Although the federal government completed the 2025 budget year 3.6 billion euros better than planned, this cushion will help in the current year.
However, things are looking worse for the coming year. Because interest rates have risen, the Finance Ministry expects additional spending of 500 million euros in 2027. Austria has therefore raised its deficit forecast for the EU from 3.5 to 3.6 percent of economic output. Eibinger-Miedl promises “extremely strict budget implementation”.
In 2028 the deficit should be below the EU limit of three percent again so that Austria can complete the deficit procedure. The government wants to achieve this primarily through spending. Two-thirds of the consolidation comes from spending cuts, including 2,000 administrative positions that will not be filled.
In addition to reforms, economic growth should also ease the burden on the budget. After the past two years of recession, the economy grew by 0.7 percent in 2025. The research institute Wifo expects 0.9 percent for this year and 1.3 percent for 2027. Long-term growth cannot come from government spending, says Eibinger-Miedl, it has to come “from the private sector”.
In order to stimulate the economy, non-wage labor costs should fall by one percentage point from 2028. Specifically, the employer contribution to the family burden equalization fund (FLAF) will be reduced from 3.7 to 2.7 percent. According to the government, the volume amounts to around two billion euros per year, financed, among other things, by higher corporate taxes and the extended bank levy. The start-up capital for the future portfolio also comes from the fund.
How far the reforms will go will be decided in the Ministry of Finance, where the ÖVP state secretary works with an SPÖ minister. "Markus Marterbauer comes from the Chamber of Labor, I from the business sector. Nevertheless, we got together well," says Eibinger-Miedl. He “proved himself willing to compromise.”
The future depot is “an important first step, but in my view it cannot be the last,” emphasizes the State Secretary. She wants additional tax allowances and the reintroduction of a holding period for capital gains, as existed until 2011. However, there is nothing about this in the government program; the SPÖ has already spoken out against the measures.
