Financial Wealth Holdings of Austrian Private Households: Data Sources and Institutional Features Peter Mooslechner jo

1. Financial Wealth Holdings of Austrian Private Households: Data Sources and Institutional FeaturesPeter Mooslechnerjoint work with Christian Beer, Martin Schuerz and Karin Wagner Luxembourg Wealth Study Conference, 14-15 December 2006

2. Structure of the Presentation OeNB Survey on Household Financial Wealth 2004: Design and implementation The Austrian data in LWS Important institutional features regarding wealth holding in Austria: some illustration ranging from retirement to real estate Publications, ongoing and planned research projects Concluding remarks

3. OeNB Survey on Household Financial Wealth 2004:Sample and Implementation Focus of the survey: Households� financial wealth, portfolios and debt Households� attitudes towards financial market issues Questionnaire with 87 questions �Pilot project�: particular reluctance of Austrian households to reveal information on wealth (tradition of anonymous bank accounts). Collection of the data by an external fieldwork company Data collection period: Summer and autumn 2004 Sampling design: Stratified multistage clustered address random Stratification was based on microcensus data. Within Austria, households were stratified at the province level, and in Vienna, households were stratified by the 23 political districts. Within the strata, the respondents were selected randomly.

4. OeNB Survey on Household Financial Wealth 2004:Sample and Implementation Interview partner was the household head or the household member with the most accurate knowledge about the respective household�s finances. Interviewed person was not paid but took part in a lottery. External field work company used a pool of 40,000 addresses covering (geographically and socio-demographically) the total of Austrian households. Combination of face-to-face interviews and written interviews yielding a total rate of return of 60%. Total of 2,556 analyzable data sets. Duration of interview: 30 to 50 minutes

5. OeNB Survey on Household Financial Wealth 2004:Sample and Implementation

6. OeNB Survey on Household Financial Wealth 2004:Postcollection Processing of Data Editing the data and conducting plausibility checks was basically the task of the field work company. Further in-house cross-checking was found to be necessary. Missing data were not imputed. Households for which essential information was missing were eliminated from the data set by the fieldwork company. Only post-stratification weights to align the sample with the Austrian population were computed.

7. Austrian Data and LWS Austria joined LWS in summer 2006. Austrian data were included in the LWS �-Version in November 2006. Main problem with inclusion was that the Austrian survey focused on the financial wealth of households. LWS demographic and financial wealth variables covered relatively well by the Austrian survey. But loans were difficult to integrate because of the way questions on loans were asked. Information on income and consumption is very limited.

8. Austrian Data and LWS

9. Austrian Data and LWS

10. Austrian Data and LWS

11. Institutional Features:Retirement Austrian pension system is dominated by a mandatory and benefit-oriented public pay-as-you-go (PAYG) scheme. guarantees a pension benefit of 80% of the assessment base after 45 insurance years at the standard retirement age of 65 years. In 2003 a subsidised private pension scheme was introduced Allows for an income tax refund amounting to 8.5% (in 2006) of the premium paid (with a cap). At least 40% of the payments must be invested in shares. The investment period must be at least ten years. Capital gains and payments from such a scheme are tax exempt.

12. Institutional Features:Retirement

13. Institutional Features:Retirement

14. Institutional Features:Retirement

15. Institutional Features:Public Subsidies for Savings Interest and dividend income is taxed with a final withholding tax of 25%. No wealth tax in Austria: wealth-related taxes are inheritance and gift tax and real estate tax. Apart from retirement-related subsidies, there are several other subsidies: Building loan contracts following investments are tax deductible within the scope of special expenses: Life insurance premia retirement insurances the purchase of dividend-right certificates and new shares, the initial purchase of convertible bonds and participation certificates Benefits from gratuitous transfers or transfers at a discount of equity holdings of the company of the employer are tax exempt up to EUR 1,460. Annual capital gains below EUR 440 are tax exempt.

16. Institutional Features:Public Subsidies for Savings Private trusts (Privatstiftungen) since 1993 Three levels of taxation: Taxation of the establishment of the trust: Transfers of assets are taxed with 5% (plus an additional 3.5% in case of real estate) instead of the normal inheritance or gift tax. Contributions of supplementary assets by the founder are also taxed with these rates. Ongoing taxation: The income of private foundations is liable to corporate income tax (25% in 2006). Dividend income from domestic investments and � depending on the regulations in the relevant double taxation agreements � from foreign investments are tax exempt. Taxation of donations to beneficiaries are taxed with 25%.

17. Institutional Features:Public Subsidies for Savings

18. Institutional Features:Public Subsidies for Savings

19. Institutional Features:Inheritance and Gift Tax Inheritance taxation lost considerable importance when final taxation of financial assets was introduced in 1993. inheritance and gift tax rates are progressive and are levied for five tax brackets that are contingent on the degree of family relationship. The rates range from 5% to 60% of the inheritance. The low inheritance tax revenues may be explained by the following factors: Financial assets that are subject to capital income tax are not subject to inheritance tax Other financial assets de facto defy taxation The gap between assessed property values and current market values of real estate Unlike assets, liabilities are assessed at their actual economic value Transfers to private trusts are subject only to a one-time low tax rate (2.5% when the rate was introduced, 5% today), and the regular levy of an equivalent inheritance tax is waived in the case of death, business assets can be optimized by juxtaposing sufficient liabilities; moreover, the exemptions for the transfer of business assets have been raised substantially

20. Institutional Features:Inheritance and Gift Tax

21. Institutional Features:Inheritance and Gift Tax

22. Institutional Features:Income Uncertainty and Unemployment Compared with other EU countries the Austrian unemployment rate is relatively low. The incidence of unemployment is particularly high for people that only finished compulsory school. Increase of employment contracts that are not fully covered by social insurance (dependent forms of self-employment and minor jobs).

23. Institutional Features:Income Uncertainty and Unemployment Self-employed and people with a minor job are not included in the compulsory unemployment insurance scheme Benefit duration: ranges from 20 weeks to 52 weeks; benefits amount basically to 55% of the previous net income Average unemployment insurance duration of 9 months Unemployment assistance (Notstandshilfe): benefit amounts to 92 per cent of the previous unemployment insurance benefits

24. Institutional Features:Real Estate and Mortgage Market Austrian property prices have not increased sharply during the previous years . Required down payments are relatively high, resulting in a LTV ratio of 60%. Ratio of outstanding housing loans to GDP is relatively low. In Austria interest payments are basically not tax deductible but there exist interest and repayment subsidies.

25. Institutional Features:Real Estate and Mortgage Market

26. Institutional Features:Real Estate and Mortgage Market

27. Publication of main results e.g. Monetary Policy & the Economy Q2/06 Ongoing research projects: Paper on poverty and asset building in Austria Financial wealth distribution in Austria Financial capability of the Austrians Planned projects: co-operation with the Swiss National Bank on the use of foreign currency loans Further research on saving behaviour, risk orientation in investment behaviour and attitudes towards financial regulation. International comparisons with the LWS data set.