Pension Reform In Hungary

The article below enlightens us with the system of pension reform in Hungary, which existed during the period prior to the World War II. What necessitated the introduction of further reforms has also been covered. It is observed that the government in Hungary recognizes three pillars in the pension system scheme of the country.
The new individuals after having entered the pension system were required to make changes in their payment mode. The system of pension was launched in the year 1929. This system different from PAYG system or the “Pay as you go” system. The PAYG was adopted by the government in Hungary after World War II following the loss of the former.

A switch over to the PAYG system could not be avoided. As such the government introduced it. Pension reform in Hungary started way back in the year 1991 but was implemented in the year 1998.

Under the old system of pension reform in Hungary, the following changes were made:
Number of years required for the calculation of average income was increased
Time span of services for fulfilling eligibility criteria was also increased.
In the year 1994, private pension funds, which were voluntary underwent pension reform in Hungary. The retirement age was increased in the year 1996. The private pension funds were launched in the year 1998.

Owing to changes in the demography, several features of the PAYG system was altered after the War. (Ratio of the pensioners)/(labor market participating members who were active) also known as system dependency ratio increased remarkably.

Statistical data prove that expenses related to pensions increased to 10% in the year 1990 from 5% in the year 1970. Pension related expenses in terms of percentage gross domestic product was found to be 9% to 10% in the last ten years.
Pension reform in Hungary
Pension reform in Hungary (comprehensive) was launched in the year 1998. According to the new pension reform in Hungary, new applicants entitled to retirement benefits were required to make payments in private pension funds. Payment into the PAYG was not needed any longer. Those who were already on the rolls of the previous pension reform scheme in Hungary, were given enough time to acclimatize to the new system pertaining to pension reform in Hungary.

Under the new system of pension reform in Hungary, three pillars were recognized.

They were:
First pillar was the system of reformed PAYG.
The second pillar was the “mandatory private pension funds”
The third pillar was the “voluntary private pension funds”.


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Last Updated on : 26th June 2013

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