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The Mandatory Private Pension Pillar in Hungary: An Obituary

Author

Listed:
  • 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," CERS-IE WORKING PAPERS 1112, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:discpr:1112
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    Cited by:

    1. Balázs Egert, 2012. "The impact of changes in second pension pillars on public finances in Central and Eastern Europe," Working Papers hal-04141069, HAL.
    2. Judit Karsai, 2012. "Development of the Hungarian Venture Capital and Private Equity Industry over the Past Two Decades," CERS-IE WORKING PAPERS 1201, Institute of Economics, Centre for Economic and Regional Studies.
    3. 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.
    4. András Simonovits, 2014. "Design Errors in Public Pension Systems: The Case of Hungary," CERS-IE WORKING PAPERS 1414, Institute of Economics, Centre for Economic and Regional Studies.
    5. Júlia Király, 2020. "Hungary and Other Emerging EU Countries in the Financial Storm," Financial and Monetary Policy Studies, Springer, number 978-3-030-49544-2, February.
    6. 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).
    7. Stefan Domonkos & Andras Simonovits, 2016. "Pensions in transition in EU11 countries between 1990 and 2015," CERS-IE WORKING PAPERS 1615, Institute of Economics, Centre for Economic and Regional Studies.
    8. 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.
    9. 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.
    10. Zsombor Z. Meder & Andras Simonovits & Janos Vincze, 2012. "Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality," CERS-IE WORKING PAPERS 1203, Institute of Economics, Centre for Economic and Regional Studies.
    11. 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.
    12. 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 Economia Aplicada, Estudios de Economia Aplicada, vol. 33, pages 659-686, Septiembr.
    13. András Simonovits, 2023. "A rational pension reform package: Hungary, 2025," CERS-IE WORKING PAPERS 2324, Institute of Economics, Centre for Economic and Regional Studies.
    14. Barr, Nicholas, 2021. "Pension design and the failed economics of squirrels," LSE Research Online Documents on Economics 111927, London School of Economics and Political Science, LSE Library.
    15. 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.
    16. 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.
    17. 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.
    18. Ju. A. Zelikova, 2022. "Social Justice and Social Reform under Condition of Population Aging. Systematic Literature Review," Administrative Consulting, Russian Presidential Academy of National Economy and Public Administration. North-West Institute of Management., issue 1.

    More about this item

    Keywords

    social security reform; old age risk; defined contribution plan; privatization; political aspect; Hungary;
    All these keywords.

    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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