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The mandatory private pension pillar in Hungary: An obituary

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  • András Simonovits

Abstract

In 1998, the left‐of‐centre government of Hungary carved out a second‐pillar mandatory private pension scheme from the original mono‐pillar public system. Participation in the two‐pillar 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 the second pillar voluntarily and another 25 per cent were mandated to do so by law between 1999 and 2010. The second pillar has not improved the financial stability of the social security system. Moreover, the international financial and economic crisis has highlighted the transition costs that are associated with moving, even if only partially, to a system of pre‐funding. In 2010, the conservative government de facto “nationalized” the second pillar, and it is to use part of the accumulated pension capital to reduce Hungary's excessive public debt and annual budget deficit and to compensate for income tax reductions.

Suggested Citation

  • András Simonovits, 2011. "The mandatory private pension pillar in Hungary: An obituary," International Social Security Review, John Wiley & Sons, vol. 64(3), pages 81-98, July.
    • Handle: RePEc:wly:intssr:v:64:y:2011:i:3:p:81-98
    DOI: 10.1111/j.1468-246X.2011.01404.x
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    Cited by:

    1. András Simonovits, 2023. "A rational pension reform package: Hungary, 2025," CERS-IE WORKING PAPERS 2324, Institute of Economics, Centre for Economic and Regional Studies.
    2. Zoltán Ádám & András Simonovits, 2019. "From Democratic to Authoritarian Populism: Comparing Pre- and Post-2010 Hungarian Pension Policies," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 69(3), pages 333-355, September.
    3. Carrera, Leandro N. & Angelaki, Marina, 2020. "The diversity and causality of pension reform pathways: a fuzzy-set qualitative comparative analysis," LSE Research Online Documents on Economics 102554, London School of Economics and Political Science, LSE Library.
    4. Carrera, Leandro & Angelaki, Marina, 2022. "The politics of pension policy responses to COVID-19: comparative insights from Chile, Bolivia and Peru," LSE Research Online Documents on Economics 116666, London School of Economics and Political Science, LSE Library.
    5. Barr, Nicholas, 2023. "Individual funded pension accounts and the World Bank: evolving views," LSE Research Online Documents on Economics 120836, London School of Economics and Political Science, LSE Library.

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