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The Mandatory Private Pension Pillar in Hungary: An Obituary

Author

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  • 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.

Suggested Citation

  • Andras Simonovits, 2011. "The Mandatory Private Pension Pillar in Hungary: An Obituary," IEHAS Discussion Papers 1112, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  • Handle: RePEc:has:discpr:1112
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    Cited by:

    1. Stefan Domonkos & Andras Simonovits, 2016. "Pensions in transition in EU11 countries between 1990 and 2015," IEHAS Discussion Papers 1615, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    2. Booth, Philip & Niemietz, Kristian, 2015. "Changes in the Pension System: Lessons for Privatisation in the UK /Cambios en el sistema de pensiones: Lecciones para la privatización en el Reino Unido," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 33, pages 659-686, Septiembr.
    3. Erik Granseth & Wolfgang Keck & Wolfgang Nagl & Melinda Tir & Andras Simonovits, 2016. "Negative correlation between retirement age and contribution length?," IEHAS Discussion Papers 1633, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    4. Balázs Égert, 2012. "The Impact of Changes in Second Pension Pillars on Public Finances in Central and Eastern Europe," OECD Economics Department Working Papers 942, OECD Publishing.
    5. 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 1-3, October.
    6. András Simonovits, 2014. "Design Errors in Public Pension Systems: The Case of Hungary," IEHAS Discussion Papers 1414, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    7. Christoph Freudenberg & Tamás Berki & Ádám Reiff, 2016. "A Long-Term Evaluation of Recent Hungarian Pension Reforms," MNB Working Papers 2016/2, Magyar Nemzeti Bank (Central Bank of Hungary).
    8. 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.

    More about this item

    Keywords

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

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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