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The Mandatory Private Pension Pillar in Hungary: An Obituary

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Author Info

  • Andras Simonovits

    ()
    (Institute of Economics - Hungarian Academy of Sciences)

Abstract

In 1998, the left-of-center government of Hungary carved out a second pillar mandatory private pension system from the original mono-pillar public system. Participation in the mixed system was optional for those who were already working, but mandatory for new entrants to the workforce. About 50 per cent of the workforce joined voluntarily and another 25 per cent were mandated to do so by law between 1999 and 2010. The private system has not produced miracles: either in terms of the financial stability of the social security system, or greatly improved social security in old age. Moreover, the international financial and economic crisis has highlighted the transition costs of pre-funding. Rather than rationalizing the system, the current conservative government de facto "nationalized" the second pillar in 2011 and is to use part of the released capital to compensate for tax reductions.

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Bibliographic Info

Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 1112.

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Length: 23 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:has:discpr:1112

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Related research

Keywords: social security reform; old age risk; defined contribution plan; privatization; political aspect; Hungary;

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Cited by:
  1. Balazs Egert, 2012. "The Impact of Changes in Second Pension Pillars on Public Finances in Central and Eastern Europe," CESifo Working Paper Series 3801, CESifo Group Munich.
  2. MLADEN, Luise, 2012. "Pension Reforms In Central And Eastern European Countries And Their Outcomes," Annals of Spiru Haret University, Economic Series, Universitatea Spiru Haret, vol. 3(1), pages 59-68.
  3. Luise Mladen, 2012. "Positive Analysis About Financial Performance AndEnviromental Strategys Of Banks. Romania’s Situation," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 2(5), pages 3, October.

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