Austrian government plans to cut partial retirement scheme to save about 200 million euros

Under the new design, the calculation of the Altersteilzeit payment will be capped at 75 percent of the highest contribution base, currently around 5,200 euros per month. This marks a clear break with the previous trajectory: the replacement rate had been scheduled to rise from 80 to 90 percent starting in 2029, a step that officials have now dropped. The government says an enhanced partial retirement scheme would undermine the new Teilpension, or partial pension, that is also being introduced.

What the reform changes

The reform follows a central recommendation of the Austrian Court of Audit (Rechnungshof), which has long questioned the cost-effectiveness of the existing scheme. NEOS has long shared that skepticism. "Wir NEOS haben die Altersteilzeit immer skeptisch gesehen, weil sie in ihrer bisherigen Form eine teure und wenig treffsichere Gießkanne war", Gasser was quoted as saying. The party estimates the changes will save roughly 250 million euros for the public purse, with the overall package forming part of the consolidation volume of the Doppelbudget.

The savings are not limited to Altersteilzeit. Employees over the age of 63 will, for the first time, have to pay unemployment insurance contributions up to the pension entry age, ending a rule under which unemployment insurance lapsed at the latest one year after the statutory minimum age for a corridor pension. Income thresholds for minor additional earnings (geringfügiger Zuverdienst) will be frozen in 2027, as they were in 2026.

Broader labor-market measures

Employers will also feel the changes. The employer levy (Dienstgeberabgabe) for minor employment relationships will rise from 19.4 to 23 percent, a step explicitly intended to favor part-time and full-time employees over marginally employed workers. The AMS, meanwhile, will cut its own company subsidy programs as part of the consolidation drive.

Self-employed workers with low and medium contribution bases will see a separate adjustment. The social insurance credit (Gutschrift) for health insurance is to be phased out gradually, with a 50 percent reduction in 2027 and full elimination from 2028. Officials argue the credit distorts choices on the labor market and is not well targeted.

The coalition's underlying principle, according to the paper, is that the package should consist of balanced measures on the employee and employer sides. The concrete design of those measures was delegated to the social partners, who negotiated the details now being presented to the public.

Fiscal context

The reform lands in a tight fiscal context. Austria is working through a Doppelbudget, a two-year federal budget framework, and the 200 million euros in labor-market savings is embedded in that consolidation volume. With the AMS 'Zwischenparken' cuts stalled, the Altersteilzeit overhaul is being positioned as the central compensating instrument.

Gasser framed the changes as a long-overdue correction rather than a simple cut. The goal, he said, is to make the scheme more targeted and less expensive, while aligning it with the new Teilpension. Whether that argument will hold politically, especially with older workers and trade unions, is the next test for the package.