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The New Hungarian Pension System and its Problems

Author

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  • Andras Simonovits

    (Institute of Economics, Hungarian Academy of Sciences)

Abstract

In January 1, 1998 a new, three-pillar pension system was introduced in Hungary. It will replace about a 1/4 of the existing unfunded public system by a funded private system from 2013. This transition is obligatory for people entering the labor market after June 30, 1998 and optional for others. Meanwhile the public pillar is also reformed. Pensionable age is increasing significantly but smoothly, wage index-ation is replaced by a combined wage-price indexation and the link between earnings and benefits will be rectified between 2009–2013. The official view is that it is this reform package which will make the Hungarian pension system sustainable in the long run and will contribute to the development of capital markets. The critics of the reforms, including the author, underline several remaining and new problems: the public pillar retains its weak points until 2013, the consolidated balance may deteriorate rather than improve under the partial privatization and the welfare of the old population will be relatively lower due to the decreased security.

Suggested Citation

  • Andras Simonovits, 1999. "The New Hungarian Pension System and its Problems," CERS-IE WORKING PAPERS 9901, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:discpr:9901
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    References listed on IDEAS

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    Cited by:

    1. Peter Eso & Andras Siminovits, 2002. "Designing Optimal Benefit Rules for Flexible Retirement," Discussion Papers 1353, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. András Simonovits, 2000. "Partial privatization of a pension system: lessons from Hungary," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(4), pages 519-529.
    3. Katharina Müller, 2000. "Pension privatization in Latin America," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(4), pages 507-518.

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