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A Long-Term Evaluation of Recent Hungarian Pension Reforms

Author

Listed:
  • Christoph Freudenberg

    (Institute of Public Finance Freiburg University)

  • Tamás Berki

    (Magyar Nemzeti Bank, Central Bank of Hungary)

  • Ádám Reiff

    (Magyar Nemzeti Bank, Central Bank of Hungary)

Abstract

This paper studies the effect of Hungarian pension reforms between 2009-2012 on the adequacy and long-term fiscal stability of the Hungarian public pension system. For the adequacy analysis, we use a micro simulation model to project future initial pension levels relative to future gross wages. For the analysis of fiscal stability, we use a generational accounting-based macro model to forecast future yearly cash balances and calculate implicit pension liability (IPL) indicators. We find that major recent reforms have stabilized the public pension system until around 2035, but after this, mainly due to unfavorable demographic developments, we project increasing deficits that reach about 4% of GDP by 2060.

Suggested Citation

  • 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).
    • Handle: RePEc:mnb:wpaper:2016/2
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    File URL: http://www.mnb.hu/letoltes/mnb-wp-2016-2-final.pdf
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    References listed on IDEAS

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    1. Alessie, Rob & Angelini, Viola & van Santen, Peter, 2013. "Pension wealth and household savings in Europe: Evidence from SHARELIFE," European Economic Review, Elsevier, vol. 63(C), pages 308-328.
    2. 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.
    3. Orazio P. Attanasio & Susann Rohwedder, 2003. "Pension Wealth and Household Saving: Evidence from Pension Reforms in the United Kingdom," American Economic Review, American Economic Association, vol. 93(5), pages 1499-1521, December.
    4. Paul van den Noord & Richard Herd, 1993. "Pension Liabilities in the Seven Major Economies," OECD Economics Department Working Papers 142, OECD Publishing.
    5. Michael Hurd & Pierre‐Carl Michaud & Susann Rohwedder, 2012. "The Displacement Effect of Public Pensions on the Accumulation of Financial Assets," Fiscal Studies, Institute for Fiscal Studies, vol. 33(1), pages 107-128, March.
    6. Holzmann, Robert & Palacios, Robert & Zviniene, Asta, 2004. "Implicit pension debt: issues, measurement and scope in international perspective," Social Protection Discussion Papers and Notes 30153, The World Bank.
    7. Monika Queisser & Edward Whitehouse, 2006. "Neutral or Fair?: Actuarial Concepts and Pension-System Design," OECD Social, Employment and Migration Working Papers 40, OECD Publishing.
    8. Andras Simonovits, 2011. "The Mandatory Private Pension Pillar in Hungary: An Obituary," CERS-IE WORKING PAPERS 1112, Institute of Economics, Centre for Economic and Regional Studies.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Simonovits, András, 2020. "A magyar nyugdíjrendszer középtávú feszültségei [The middle-term tensions of the Hungarian pension system]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 456-473.
    2. Tibor Czegledi & Endre Szabo & Melinda Tir & Andras Simonovits, 2016. "Retirement rules in Hungary: gainers and losers," CERS-IE WORKING PAPERS 1631, Institute of Economics, Centre for Economic and Regional Studies.
    3. Erik Granseth & Wolfgang Keck & Wolfgang Nagl & Melinda Tir & Andras Simonovits, 2016. "Negative correlation between retirement age and contribution length?," CERS-IE WORKING PAPERS 1633, Institute of Economics, Centre for Economic and Regional Studies.
    4. Larysa Yakymova, 2018. "Modeling the Diffusion of Private Pension Provision," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 65(4), pages 385-405, December.
    5. à kos Péter & Erzsébet Németh & Bálint Tamás Vargha, 2020. "Sustainability of the Pension System, Risks and Opportunities," Public Finance Quarterly, State Audit Office of Hungary, vol. 65(6), pages 57-85.
    6. Simonovits, András, 2022. "Nyugdíjstratégiai alternatívák, 2023-2029 [Pension strategy alternatives, 2023-2029]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 902-928.
    7. László, Csaba, 2018. "A magánnyugdíjpénztári rendszer "elszámolása" ["Reckoning up" the private pension system]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 861-902.

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    More about this item

    Keywords

    Pension reforms; Sustainability of pension systems; Micro simulation;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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