Raising retirement age in Hungary – the sky is the limit?

According to a new estimate, the next 35 years will see a process whereby there will be 53 pension-age citizens for every 100 employees of the active age, causing severe drops in pension-age life quality, portfolio.hu reports. One recent study suggested raising the retirement age in Hungary by seven years, but this will not necessarily be enough to resolve the issues. What is needed is changes in the labour market, for instance, the increased participation of women in the labour force.

As a recent analysis of the link between ageing societies and labour shortage points out, ageing is an accelerating process, meaning that the proportions of old-age dependency increased by 40% from 1980 to 2015. And there is a predicted 90% increase over the next 35 years.

Some governments try tackling the issue by raising the retirement age. Analyzing these measures, the researchers attempted to calculate the increase rate that would be necessary for the OECD/EU economies to maintain stable old-age dependency ratios. Between 2015 and 2050, such stabilization would necessitate raising the retirement age by an average of 8.4 years. In the case of Hungary, this figure turned out to be 7 years.

This would mean that the working age would be extended to 72 years.

In an employment-based pension system like that of Hungary, the decrease in pensions can be avoided with the help of higher pension contributions, higher employment rates (achieved by a raised retirement age or increased participation of women in the labor force), or through a fiscal deficit in the pension budget that can be covered by taxes.

Source: portfolio.hu