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Case Study: Buying Pension Years vs. Investing the Money

Client’s Question

A man­ag­ing direc­tor asked whether to buy addi­tion­al pen­sion years from the Aus­tri­an Pen­sion Insur­ance (PVA) (costs around €160,000) or invest the mon­ey instead. Accord­ing to the PVA, the buy-back would increase the month­ly pen­sion by about €900 (paid 14× per year). The client want­ed to know if the buy-back is tax-deductible and which option is eco­nom­i­cal­ly wis­er.

Our Approach & Recommendations (Kobleder TAX Advisors)

We pre­pared a clear, side-by-side com­par­i­son in plain lan­guage:

  • Tax treat­ment: The buy-back is gen­er­al­ly deductible as a spe­cial expense. We com­pared one-time deduc­tion vs. 10-year spread­ing, includ­ing the time val­ue of mon­ey.
  • Net pen­sion view: We looked at the net effect of the high­er pen­sion after health insur­ance (6%) and income tax, so the com­par­i­son isn’t just “on paper.”
  • Alter­na­tive: self-invest­ment: We con­trast­ed the buy-back with invest­ing the funds (after-tax returns, mar­ket ups and downs, liq­uid­i­ty).
  • Inheritance/legacy:
    • Buy-back: No cap­i­tal account. In case of death, only sur­vivors’ pen­sions may apply (share of the orig­i­nal pen­sion, sub­ject to con­di­tions).
    • Self-invest­ment: The assets remain liq­uid and ful­ly inher­i­ta­ble.
  • State con­text: Aus­tria cur­rent­ly runs a high­er bud­get deficit. Pen­sions are legal­ly pro­tect­ed, yet rules (e.g., index­a­tion, access para­me­ters) can be adjust­ed over time. A buy-back remains very secure, but not entire­ly free from pol­i­cy changes. A self-invest­ment is inde­pen­dent of pen­sion rules but car­ries mar­ket risk.

Key takeaway:

  • Choose the buy-back if you val­ue pre­dictabil­i­ty, a life­long, infla­tion-adjust­ed income, and expect to draw a pen­sion for many years.
  • Pre­fer self-invest­ment if flex­i­bil­i­ty and inher­i­tabil­i­ty mat­ter more and you are com­fort­able with mar­ket fluc­tu­a­tions to tar­get high­er long-term after-tax returns.

Client Benefits

  • Clar­i­ty with­out jar­gon: A sim­ple, deci­sion-ready com­par­i­son of both paths.
  • Real­is­tic expec­ta­tions: We focus on net fig­ures and time val­ue, not just gross num­bers.
  • End-to-end sup­port: If desired, we han­dle all fil­ings and for­mal­i­ties (Finan­zOn­line entries, tim­ing, doc­u­men­ta­tion).
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