Pension Levels and Income Replacement Ratios after the Adoption of the General Retirement Income Act

The effects of pension harmonisation on individual pension levels can be shown by applying the provisions of the General Retirement Income Act (APG) to the insurance patterns of persons retiring and receiving their first old-age pensions in 2002-03. For men, the General Retirement Income Act results in a reduction of gross pension benefits and a lower income replacement ratio, i.e., the ratio between the first retirement income and the last earned income. The extent of the reduction depends on the retirement age and, in particular, the deductions due to early retirement (corridor pension). In case of a long contributory period (traditional employment pattern), the income replacement ratio drops by 6 percentage points, while for persons with unstable insurance patterns the income replacement ratio according to APG will be about 14 percentage points lower than according to ASVG (General Social Insurance Act). These losses can be mitigated through continued employment up to the statutory retirement age and offset for persons with a traditional insurance history.