Equity Investments and the Third Pillar of Retirement Provision
Series
SSRN Working Paper Series; 7611560
Type
working paper
Date Issued
2026
Author(s)
Abstract
Broadly diversified equity investments are a suitable building block for the third pillar of retirement provision. Since 1987, Austrian equities have returned 4.46 percent per year in real terms after Austrian tax on investment income (KESt), modeled for a direct investment, and before costs, European equities 4.18 percent, and savings invested at the money-market rate (the savings proxy) -0.25 percent. In the sample starting in 1970, no window of 20 years or more ends in a real loss for Austrian equities, compared with more than 40 percent of the twenty-year windows for the savings proxy. The series extended back to 1958 returns 4.07 percent per year in real terms after KESt but also shows seven twenty-year windows that end in a real loss. Austria's own subsidized product, the Zukunftsvorsorge, combines a mandatory capital guarantee with an equity allocation invested mainly in the home market. Its number of contracts has more than halved since 2012. This purchasing-power analysis for Austrian investors under today's tax rules, the Austrian experience, and an international comparison of account models yield criteria for an Austrian retirement savings account.
Language
English
Keywords
equities
retirement provision
third pillar
retirement savings account
capital markets
saving
inflation
returns
risk
savings and investment accounts
diversification
product design
capital guarantee
HSG Classification
contribution to scientific community
Refereed
No
Official URL
Subject(s)
Division(s)
Additional Information
JEL classification: D14, G11, G18, G22, H24, H55, J32
File(s)![Thumbnail Image]()
Name
Equity_Investments_Third_Pillar.pdf
Type
Main Article
Size
624.15 KB
Format
Adobe PDF
Checksum (MD5)
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