Pension Reform in Hungary : A Preliminary Assessment

Rocha, Roberto ; Vittas, Dimitri

World Bank, Washington, DC

关键词: ACCOUNTING;    ACCRUAL RATES;    ACCUMULATION PERIOD;    ADMINISTRATIVE COSTS;    AGING;   

DOI  :  10.1596/1813-9450-2631
RP-ID  :  WPS2631

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Hungary is entering the fourth year of amulti-pillar pension reform that has proved popular amongworkers despite initially lukewarm support from thegovernment that succeeded the reforming government, anddespite the poor initial performance of capital marketsbecause of Russia's crisis in 1998. Roughly half thelabor force joined the new system voluntarily. Most whoswitched were younger than 40. Many people switched to thesystem because it offered more risk diversification. Thepay-as-you-go (PAYG) system, which had been severely damagedby repeated manipulation of its parameters, clearly offereda low return on contributions. The new system is stillpredominantly PAYG. The first pillar accounts for more thantwo-thirds of the total contribution, but the new secondpillar offers the chance of higher average returns oncontributions. Most workers probably intuited the risk andreturns inherent in a pure PAYG system and mixed system,including the capital market risk in the second pillar andthe political risk in the PAYG pillar. The new system offersbetter prospects of long-run risk-adjustment returns foryoung workers, and most young workers effectively opted forthe new system. But the new system was probably oversold aswell, making older workers - who would be better off stayingin the reformed PAYG system - switch too. The government hasso far decided not to increase the contribution to thesecond pillar from 6 to 8 percent, as originally planned, soefficiency gains in labor and capital markets may also besmaller than expected. Addressing projected deficits in thePAYG system may require further adjustments, such asdelaying the retirement age and shifting to indexed prices,reducing net benefits to future generations. Reform hassharply reduced the severe initial bias against futuregeneration but hasn't eliminated it altogether. Thevoluntary switching strategy achieves the same outcome as aforced switch based on an arbitrarily cutoff age, whilepreventing legal problems and contributing to the reductionof the implicit pension debt. But it leaves a fewindividuals worse of the if they'd chosen their bestoption - a problem a well-designed public informationcampaign can reduce.