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The government repeatedly welcomes the fact that the increase in pensions goes in parallel with the inflation curve, but there are several organizations of the elderly that are not entirely satisfied with the current situation. Katalin Papp, president of the National Representation of Pensioners (NYOK), for example, told Infostart that the differences between Hungary’s salaries and pensions are increasing. This is also confirmed by CSO statistics:
the average pension did not reach 52 percent of the national average net salary in 2019,
and if the trend of recent years continues, this number will be lower and lower (decreasing since 2015). If to this is added the fact that 18.8 percent of retirees are at high risk of poverty or social exclusion, the alarm may already sound. Katalin Papp tells the Index that they have been hanging out for quite some time.
I don’t see any attempt by the government to close this gap between wages and pensions
The NYOK president said, adding that they had come up with a proposal along which this could be done. “The Prime Minister passed this on to the Ministry of Human Resources, from where he ran for an almost offensive response. Then we addressed him in a letter, we also invited him to a live consultation, but to no avail ”, Katalin Papp recalls the attempt from years ago. He added that in the years after the 2010 change of government, there were not even fictitious negotiations with pension organizations. At first yes, but the government did not hold statutory social consultations with the unions.
The specialist, who is also vice-president of the Union of Workers of Public Collection and Public Culture (KKDSZ), sees two big problems in the Hungarian pension system:
- the change in mixed indexation in the determination of pensions in 2010,
- and what was left behind equalization of annuities for retirees in different periods.
Following the change of government in 2010, the Cabinet changed the mixed or “Swiss” indexation when establishing pensions. From then on, according to the reform of the law at the time
pensions have lagged behind the current average net salary increase, only after inflation.
In Hungarian, the government stated that pensions were based on value simply by following the increase in consumer prices and therefore considered the matter settled. He argues that the weighted average of wages and inflation in a reconsidered indexing scheme could be debated, but that would require the openness of the government. According to experts, there is also no consensus, such a redesigned indexing can create fair conditions, because if, for example, the salary index weighs only 10 percent, it would do almost nothing to improve the situation.
We also asked András Simonovits, a pension expert, about mixed indexation, who thinks it would only be worth reintroducing it in a modified form, and only if the government also restructured the wage indexation. This year, for example, statistics show a 6 percent increase in real wages, but the wage index does not include employees of companies with fewer than 5 employees. Thus, this type of salary statistics is “life threatening”, it does not show the real picture, and this also affects the determination of pensions.
Correction missing
Part of the problem with tracking inflation is that in next year’s budget, the government can only predict the degree of deterioration of the money, and if you underestimate it, adjusted pensions will grow at a lower rate than actual inflation. (Between 2013 and 2016, the government increased the real value of already established pensions by about 8 percent.) According to Katalin Papp, this also happened in 2020, as the government was unable to forecast above-average inflation due to the Covid crisis. András Simonovits qualified the picture: By 2020, the estimated inflation was 2.8 percent up front, which eventually jumped to 4 percent, with the government paying the 1.2 percent difference in November. Retired college professor sees a problem with that
the crisis changed the nature of inflation and there were no corrective measures following the rise in food prices, and the government did not help the poorest with emergency aid.
Katalin Papp sees the same, and since a larger than average proportion of the retiree “basket” is food, older people moving around the poverty line in addition to medicine can hardly provide a daily livelihood. They just have to put aside their livelihood needs. Within the framework of NYOK, the Coordinating Council of Retiree Organizations (NYUSZET), initiated an initiative with the Prime Minister to ensure that those living with pensions below 100,000 HUF receive a one-time benefit of 50,000 HUF in 2020, but did not accept their request .
Those who retired in the “bad” year
In addition to the lack of mixed indexation, Katalin Papp sees the other big problem in the fact that the annuities of those who retire in different periods have not been paid, which can lead to large differences between the pensions established in different periods.
Thus, for example, there may be a difference of almost one hundred times between the minimum pension of HUF 28,500 and the highest established pension.
which is quite unique, in a negative sense of course.
The minimum wage and the guaranteed minimum wage started to rise sharply from the mid-2010s, which is basically commendable, meaning that those who retire within 5 years will automatically receive a much higher amount, while as Go back in time, the average annuity will get lower and lower. it also does not affect who did the amount of high value-added work. Contributions for those aged 70 to 75 are deducted under a completely different law, and those who, for example, spent their last active years in the 1990s are entitled to a very low pension. In Hungarian
the most disadvantaged are the older pensioners,
You can no longer make up the amount owed. Currently, there are 294 thousand pensioners living in Hungary whose pensions do not reach 105 thousand florins, that is, the poverty line.
Katalin Papp believes that due to the above, there would be a great need for correction, which should be implemented in the form of a value adjustment mechanism. This could be done in conjunction with a bill introduced in 2005, which was later voted on by Fidesz, which specifically targeted the adjustment of pensions and was swept away by the economic crisis that began in 2008. Since then, no one has withdrawn it, replacing it with a pension premium linked to the annual performance of the economy.
Wages need to be addressed too
One in five retirees is at risk of poverty
According to CSO data in 2019, in the case of the income levels necessary for the subsistence of active, retired, unemployed and inactive households, the very narrow budget is 72,500 HUF, the meager 95,300 HUF, the average 131,800 HUF and the good 181,300 HUF. per month. Among those over 65, the relative income poverty rate was 14.9 percent (2019 data), while the proportion of people living in severe material deprivation in the same age group was 6.7 percent last year. A more serious picture shows how many are at risk of poverty or social exclusion: 18.8% of those over 65 in 2019.
András Simonovits is convinced that the tension caused by the enormous differences between the pensions established in different periods can be alleviated at the latest. The reassuring solution is impossible due to the fact that real wage growth shows a different level each year, and depending on that, someone does well, others do very poorly when they retire in a given year. Coinciding with Katalin Papp, he also recommends restarting the pension adjustment.
The economist-mathematician also considers the rapid reduction in the social contribution rate flawed because, as a result, net real wages have grown much faster than the employer’s costs.
Therefore, real wages were practically artificially increased by the government, regardless of market developments, but the performance of the economy did not adjust to this increase.
All this has dramatically increased initial pensions, reinforcing a process of relative impoverishment among retirees, since it is considered that older people who receive a pension below 60 percent of the median income already live in (relative) poverty according to the current category.
Simonovits would change a number of points: it would revitalize the Budget Council, which currently only has a formal role, and would increase the number of its expert members to 50, who could thus more effectively plan the reform of the tax or pension system . In addition, opposition parties must have the opportunity to access the statistics and analysis that this team produces on each reform. Finally, it is true that the personal income tax should be multiplied again or, if this does not work, the attack on pensions should be expanded, that is, the taxation by bands of the pension fund, which could have an immediate positive effect on the distinction between ‘new’ and ‘old’ pensions. big difference. He gave the following example of the need for comprehensive reform:
The wage and pension system is also like a car: some items cannot be replaced without affecting the overall functioning of the other items and the car.
(Cover Image: Index Photographer: Czerkl Gábor)
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