retirement-old-people-home
source: MTI/Varga György

Regarding the sustainability of the current pay-as-you-go pension system, many different issues can be brought up. It is unsustainable; therefore, a point system described at the professional conference of the Hungarian Economic Society would change it so that the age limit and amount of the pension would also depend on the number of children raised by the individual.

The German pension calculation, for example, is based on the system of pension points introduced in 2001, in contrast to the Hungarian one currently in place. After each insurance year, each insured person receives a pension point that reflects their relative earnings in that year. The monthly amount of the pension is determined using the following formula: the number of personal pension points is multiplied by a bonus-malus multiplier, then the current pension value, and then by a multiplier depending on the type of pension.

Regarding the sustainability of the current pay-as-you-go pension system, the rapporteurs of the conference highlighted six different issues, wrote index.hu. They are the following:

  • The system is based on the ability of the next generation to finance the elderly, although the explanation of the creators was that it is based on the ability to pay contributions of the present generation.
  • Pensions are backed by implicit public debt. Although the amount that the state borrows as a loan to pay pensions does not appear in nominal terms, it still exists.
  • In this system, the elements of insurance and solidarity are mixed.
  • Once the state has been put behind the system as a guarantor, there is virtually no reserve behind the system.
  • It assumes a steady increase in the population, although, in theory, a decrease in the population should not be a problem due to an increase in productivity.
  • The system has practically undermined itself, given that it was not financially worthwhile to have a child.

Said József Banyár, a professor at the Corvinus University of Budapest, in his presentation on the topic.

Erzsébet Kovács, who also teaches at Corvinus, described the process with statistics, according to which while the proportion of women of childbearing age decreased spectacularly between 1999 and 2019, the proportion of women over the age of fifty and pensioners increased by about the same ratio. So contributions would have to be significantly increased to cover pensions.

Another serious problem is that the average number of children per family is only increasing in a minimal amount, much less than the required for future stability.

Although the system is based on contributions paid by active workers, it sees the child as a public good, which is a fundamental flaw.

If they consider who contributes to the maintenance of the pension system by giving birth to multiple children, influencing the amount of the allocated pension in proportion, that could be a possible solution that may be attempted in the future. This way, the ultimate financier would be practically the child.

Under the system mentioned before, the pension amount would be calculated by taking account of the number of pensions depending on the number of children raised.

As a consequence of the system, the pensions of the childless would be much lower, or their retirement age would have to be raised. People would pay a certain amount from the moment they start work, and from this, they would finance the period between the normal and the raised retirement age for the childless.

This could potentially prevent the further spread of the “problem group” that makes the current pension system unsustainable.

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Source: index.hu; vg.hu

4 comments
  1. Is the standard of living of retired Hungarians measure up to other EU nations. The answer is Definitely. Simply converting money is just stupid. No one starves in Hungary. There is very little homelessness. Retired Hungarians do better than German retired people. Germany spends it money supporting illegal aliens, Hungary spends it money on its people.

  2. Thanks Maria Von Theresa. Does not explain why lots of our older countrypeople go through the dustbins, every day, looking for aluminium, glass, food, anything of value. I don’t see that in for instance Germany. Or the Netherlands. Or … You get the picture. It’s embarrassing. We don’t have “the foreigners” and we are still not able to take care of our needy!

  3. Moving forward – Hungary should be considering very seriously – SUPERANNUATION.
    The Government of Australia – the mass membership and billions of Australian Dollars held in members funds contributed by employees and employers – lot at it’s FUNCTIONALITY – it’s way of operating.
    It has been a SAVER to the Australian Government.
    Superannuation is VERY much geared at taking the pressure of a Government. It provides the facility to build personal wealth to those in their working lives.
    When they retire at say 67 years old – depending on the size of their superannuation fund – they may still receive, a part old age pension by the Australian Government, but their lifestyle is geared to the MONEY they hold in their superannuation funds.
    Their are taxational benefits to contributors into Superannuation funds.
    The growth in Australia over the past 35 years plus into members and Australian Dollars held in Superannuation funds has been phenomenal – astounding – unbelievable.
    It has lessened the impact on the Government of Australia – when people retire to pay – the Old Age Pension – because people have SAVED through the Superannuation arrangement – Employee/Employer and supported by the Government.
    Hungary – for the young – the new generation of Hungarian workers – look into Superannuation.
    Look at the site under – Australian Super.
    Look at the members the holdings the growth on-going of that one fund in Australia.
    They are the largest and my fund of membership – that this year – by 30th June 2021 – the return on my held funds by them through global share trading – will return between 22% & 23% increase compared to 30th June 2020 – and we still are in a global novel corona pandemic.
    Look into SERIOUSLY – Hungary.
    Great vote getter – BIG incentive – should be to the YOUNG of Hungary – if say the Big 6 or the present Government – threw it into – why you should vote for us //
    I know SUPERANNUATION – is a WINNER for Governments but of greater importance MEMBERS – CONTRIBUTORS to its PURPOSE.

  4. Maria Von Theresa – is it true you played at senior school Maria – in the production of The Sound of Music ???
    Remember the words – “how do you solve a problem like Maria”.
    Social Inequality – do you believe it is less in Hungary than in 2011 ?
    Is the social gap – the rich get richer and the poor get poorer – narrower in Hungary than it was in 2011 ?
    My unequivocal position – in answering these (2) two questions is – NO.
    Do I believe social inequality in Hungary will improve in the next (5) five years ?
    My Answer – No.
    Hungary – as is the factual position of vast numbers of country’s throughout the world – no real control over social inequality – through their FOCUS being on building the total bottom line “Worth” of their budget sheets.
    History – has such depth in factual examples and situations that should educate 21st century human beings on Social Inequity – but we continuously Fail or turn a blind eye to its impact and existence within principal core fabrics – in the structure of modern 21st century life and society.
    Country – I know a little of – population 26 million, of (6) six states – that historically has had a “nick name” of being the called the lucky country.
    Pre the outbreak of the novel coronavirus pandemic February 2020 – statistically it was reported 6 thousand citizens plus – of this “lucky country” slept out on streets – homeless EVERY night.
    Governments and Churches – can do more to lessen social inequality.
    Hungary – the largest land owner is The Holy Roman Catholic Church of Hungary – can and must do MORE for those in NEED.
    Human life – from whatever “station in life” we come – their must be attention paid and continuous action(s) by Governments and Churches – to see the reduction of inequality in peoples lives.
    The right of life and the right of ALL humans to a standard or quality of life – that gives respect and dignity – that does not see this on-going mounting numbers not just in Hungary but globally – Un-Loved – Lacking Empathy and Forgotten.
    Maria are you ;
    “A flibbertijibbet ! A will-o’ the wisp ! A clown!

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