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The decree establishes Law LXXXI of 1997 on Social Security Pensions. in accordance with Section 62 (3) and (4) of the Law
As of November 1, 2020, with retroactive effect from January 1, 2020, pension benefits must be increased ex officio by 1.2%.
The regulation lists in point 27 the benefits to which the supplement applies (such as old-age pension, widow’s pension, parental pension, orphan’s benefit, accidental relative’s pension, etc.).
An important element of the legislation that has just been published is that the Benefits expiring in November 2020 should already be paid to beneficiaries in a larger amount.
In addition, the amount of the increase for the months of January to October 2020 will be paid ex officio at the same time as the benefit for November 2020.
The decree will enter into force the day after its publication, that is, on Thursday.
Why is this necessary?
More than a month ago, after inflation started in the first eight months, it was decided that inflation for pensioners was well above the standard increase in pensions in January. In accordance with the pension rules, automation is introduced in such cases, according to which the interested persons receive compensation. (The law says: “the expected rate of increase in consumer prices in the current year is at least 1 percentage point higher than the inflation rate forecast for the year, a further increase in pensions should be implemented in November , with retroactive effect to January 1, then in November the difference for the entire year will be paid in a single amount.
And since the government raised pensions by 2.8% at the beginning of the year, but the inflation rate of pensioners in the first eight months reached 4%, then, as we predicted earlier,
An additional 1.2% pension increase will be implemented with a payment in November.
| Pension compensation in practice (%) | ||
| January increase | further increase in November | |
| 2011 | 3.8 | 0.5 |
| 2012 | 4.2 | 1.6 |
| 2017 | 1.6 | 0.8 |
| 2019 | 2.7 | 0.7 |
| 2020 | 2.8 | 1.2 |
| Source: Portfolio | ||
At the level of the average pension this year is + 20 thousand florins
So the difference between the realized and expected increase is greater than 1 percentage point (this has only been the case once in the last 10 years), so in November retirees will receive 10 months of extra money in a single amount and in November and December will already receive an increased amount.
- In November, you will receive the additional increase for the period from January to October, which will be 17,000 HUF in a single amount.
- And in November, pensioners’ benefits will increase to HUF 143,700, from HUF 142,000. You can also get a larger amount in December.
- Therefore, compared to the original state the relative position of those receiving a half pension will improve by HUF 20,500.
- In addition to the additional increase in pensions being integrated into pensioners’ benefits in November, older people will also be better off in 2021, as this increase will be compounded by the 3% pension increase planned for 2021 ( in November and December). In January 2021, the increase of 3% next year will be added to the average pension, which has meanwhile increased to 143,700 HUF, resulting in an average pension of 148,000 thousand HUF in January 2021.
If we start from the assumption that the budget spends about 298 billion HUF per month on pensions this year, then the additional pension increase of 1.2% means 3.6 billion additional florins per month, and for the whole year we are talking about unplanned expenses of 43.2 billion HUF.
Cover Image Source: Getty Images
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