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The report submitted by the State Audit Office for the final accounts clearly reflects the fact that the newly established pensions are separate from the previous ones, noted mfor.hu. By the way, non-governmental pension experts have been warning for some years about the magnitude of the problem.
Very revealing data on pensions appeared in the report of the State Audit Office, which was attached to the bill on the implementation of the 2019 budget. This makes it clear how the per capita benefits of new retirees skew the benefits per capita. The reason for this is the increasing amount of initial pensions, which is causing an increasing difference between the elderly – read on the portal.
The SAO report states the following: The number of beneficiaries of pensions and pension-like benefits has been declining for years (almost 3 percent between January 2017-2020), during which time the average amount of total monthly benefits it has increased by 15.6 percent. In terms of the amount of pensions, this means that while in January 2017 the average monthly total benefit was 112,005 HUF, in January 2020 it was 129,444 HUF.
Returning to the pension increases for the period analyzed (taking into account the mid-year increases, which were necessary due to higher inflation than planned), we obtain an amount lower than that announced in the SAO report for January 2020. (The full benefit in this case is presumably covered by the old age benefit.)
During these three years, the following increases were implemented, which will be included in subsequent retirement:
- November 2017: 0.8 percent
- January 2018: 3 percent
- January 2019: 2.7 percent
- November 2019: 0.7 percent
- January 2020: 2.8 percent
The product of these and the monthly average for January 2017 will amount to 123,631 HUF for January 2020. However, the SAO report includes 129 444 HUF for this last date. The difference is HUF 5,813: this is how much the average pension at the beginning of this year was higher this year than what would result from the increases.
This can only be explained by the fact that the amount of initial benefits for those who retire in the meantime increases the average. Steep salary increases in recent years have placed retirees in a much better position, because they were able to start from a higher salary base when calculating their compensation than those who had previously completed their active years, wrote mfor.hu.
There may be even bigger differences
The effect detailed above is created by the calculation model of the Hungarian pension system: when calculating the average income of the so-called net monthly career on which the pension is based, the net income of the years prior to retirement is adjusted to the level average net income for the year prior to retirement.
Before 2016, this problem did not arise because real wages did not increase, and in fact there was a year in which they decreased. After that, however, wage growth began, which was also supported by a reduction in the social contribution tax (soco) rate. In such a mechanism, not only will the average pension drop drastically relative to net earnings, but the benefits from newly retired crops will increase by about 10 percent per year compared to previous years. And pensions from 2018 will be almost 30 percent higher than before 2017, said András Simonovits, an expert on pensions, in an interview with our newspaper last year.
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