To ensure that the purchasing power of pensions remains intact, they are always multiplied by the statutory adjustment factor on 1 January of each year.
The adjustment factor is based on a reference value. The reference value for pension adjustments is set in such a way that the increase in pensions corresponds to the rise in consumer prices.
The reference value for 2020 has been set at 1.018. However, in 2020 the pension adjustment will deviate from the reference value.
On 28 August 2019, representatives of the Austrian Senior Citizens Council (the umbrella organisation of the largest pensioners and senior citizens’ associations) along with the leaders of the parliamentary parties of the Austrian People’s Party (ÖVP), the Social Democratic Party (SPÖ) and the Freedom Party (FPÖ) agreed on a pension adjustment for 2020 which was adopted on 19 September 2019 in the National Council.
The 2020 pension adjustment includes a sliding scale which increases smaller pensions considerably:
- Smaller pensions up to the tax threshold of €1111 will be increased by twice the statutory adjustment factor of 1.8 percent, in other words by 3.6 percent.
- Starting from €1112 up to a pension amount of €2500, the increase is reduced from 3.6 percent to 1.8 percent for all pensions, including those of civil servants.
- Pensions above this amount up to the ceiling on insurable earnings at €5220 are increased by 1.8 percent. Pensions above this level are increased by a fixed amount of €94.
The average increase in consumer prices, on which the calculation of the adjustment factor is based, amounted to 1.8 percent. For recipients of smaller pensions, this means that their pension increase was twice as much as that provided for by the law. Pensions of this amount are below the income tax threshold, so the increase in pensions is also tax free.
Due to the 2020 pension adjustment, of the approx. 2.1 million recipients of a statutory pension, around 970,000 are in the stage which will receive a pension increase of 3.6 percent. Somewhat more than 900,000 persons are in the incremental stage; i.e. they receive an increase of between 1.8 and 3.6 percent. Somewhat more than 230,000 persons receive a pension between €2500 and €5220 and thus a pension increase of 1.8 percent.