Austria to cap partial retirement benefits, reduce program costs amid efficiency concerns

Austria's government is moving to reform its "Altersteilzeit" (partial retirement) program, facing significant criticism regarding its cost and effectiveness. A report by the Court of Audit at the end of 2025 deemed the measure, introduced in 2000, "devastating," highlighting that it cost around 600 million euros in 2024.

The audit found no evidence that Altersteilzeit helped keep individuals in the workforce longer. Instead, it suggested that supporting reduced working hours might not optimally utilize the potential of older workers while incurring substantial expenses. Previous government adjustments, such as introducing partial pensions and restrictions, had only partially addressed these concerns.

The impetus for the current changes stems from coalition disagreements, particularly concerning measures against the "intermediate parking" of workers at the AMS. This practice, where seasonal workers with re-hiring commitments are temporarily sent to AMS, reportedly costs around 700 million euros annually. While a waiting period for benefits was proposed to save approximately 250 million euros, the ÖVP's business wing, led by Martha Schultz from the tourism sector, reportedly blocked the measure.

As an alternative, the coalition quickly agreed on cuts to Altersteilzeit. The Social Democratic Party (SPÖ) aims to soften these measures, but key points are reportedly fixed. The replacement rate will remain at 80 percent and will not increase to 90 percent as planned for 2029. Additionally, a cap will be imposed for high earners, set at 75 percent of the maximum contribution base, currently around 5,200 euros. These changes are slated to take effect from 2027.