The reversal of the pension reform 1998 from a short-term perspective

The private pension pillar established in 1998 has generated equally important short-, medium- and long-term effects. This article addresses the short- and medium-term time horizons, which differ from one another. In the short term, the government lost contribution revenues, while its pension expenditures did not decrease. However, since this shortfall in state revenues did not influence the consumption and savings decisions of households, in this analysis the short-term indicators of fiscal impact on demand disregard the impact of lost revenues. In the medium term, however, the rechanneling of contributions increased public debt and household savings. Consequently, similarly to official statistics, our household indicators and our medium-term fiscal indicator (augmented SNA deficit) take into account the effect of lost revenues. As the vast majority of members returned to the state pension pillar in 2011, for the purposes of our analysis, we could well assume that the private pension pillar never existed. Accordingly, the difference between our medium-term fiscal indicator and the short-term indicator disappears. As a result, we have changed our household indicators retroactively in such a way as if the contributions and the returns they yielded had always belonged to the state. This was necessary because the official statistics do not spread this amount over time, but account for it in full for 2011 as a capital transfer between households and the general government, which renders evaluation of the developments extremely difficult.