Will it be more favourable to be a pensioner in Romania than in Hungary? Here’s what the expert says

Pensioners in Romania now benefit from a German-style points system. Romania’s reforms, which account for both inflation and wages, mean that Romanian pensioners now receive higher pensions than their Hungarian counterparts. Hungary’s reluctance to reform has placed its retired citizens at a disadvantage.

More significant pension rise in Romania

As Szeretlek Magyarország writes, Romania has introduced a German-style pension points system, leading to more substantial pension increases than in Hungary, where the government has been slow to reform. Romanian pensions are now linked not only to inflation but also to wage levels. Over recent years, pensions in Romania have risen by nearly 40%, while in Hungary, they have barely increased by 10%. For the first time, Romanian pensioners are receiving higher pensions than their Hungarian counterparts, a clear indicator of Romania’s effective pension reforms. According to pension expert András Farkas, without changes, the Hungarian system could leave its pensioners further disadvantaged.

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Romania takes the lead

Once comparing itself to Austria, Hungary now finds itself looking towards Romania in discussions on pensions. While both countries submitted Recovery and Resilience Plans (RRF) for EU funding post-Covid, Hungary has yet to commit to the pension reforms due by 31 March next year. Romania, by contrast, enacted a law in 2023 to recalculate pensions from 1 September 2024, impacting 3.8 million pensioners. This recalculation, part of wider pension reforms, has resulted in average increases of 40%, with some Romanian pensioners seeing rises as high as 80%. Unlike Hungary, Romanian pensions will increase in line with both inflation and gross wage growth, giving Romanian pensioners a clear advantage.

Why is Hungary reluctant to change?

Hungary’s inaction on pension reform is partly linked to the Recovery and Resilience Fund (RRF) payments being withheld by the European Commission. One of the 27 commitments required for these funds was pension reform, for which an OECD expert study was conducted. However, the Hungarian government has not made the study public, insisting that the current pension system is adequate. The Ministry of Finance claims that pensioners’ purchasing power is protected and the 13th-month pension is secure, rejecting the need for reforms. As a result, Hungary risks losing EUR 6 billion in non-repayable aid.

Despite this, the Hungarian government had committed to all the milestones in its own RRF plan, which included pension reform. Experts argue that reform is crucial, pointing to Romania’s successful implementation, which has greatly improved pensioners’ living standards. By ignoring these reforms, Hungary risks further impoverishment of its pensioners and missing out on substantial EU funds that could improve their situation.

Potential changes

The expert points out that compared to Romania’s progressive pension reforms, Hungary’s potential changes, as proposed by the OECD, would be far less substantial and fail to modernise the system. Romania has adopted a German-inspired model with incentives for longer work and significant pension increases, while Hungary’s suggested reforms, such as raising the retirement age and recalibrating pension rates, would not address long-term challenges for future pensioners. Despite Hungary having a more favourable worker-to-pensioner ratio, careful consideration is needed to avoid costly missteps, such as revising the “Women’s 40” scheme and the 13th-month pension.

Photo: depositphotos.com

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• EU proposes adjusting Hungary’s retirement age: here’s how

Featured image: depositphotos.com