Pensions containing allowance paid by children – why and how?

Abstract

The present pension systems allocate only a minimal allowance (about 1 or 2% of the total pension budget) to those who raise children, endangering the reproduction of the population and leading to an ageing society. Here we suggest a pension model based on the expenses of child-raising families amounting to 10 to 15% of the total amount of pensions (about 25% of mothers’ pensions). The financial source of this system can be a separated and well-defined ratio of children’s pension contributions paid for at least 13 years until the age of 37. Mothers reaching the retirement age could obtain the suggested pre-determined amount of pen-sion supplement (approximately HUF 140 thousand per children tailored to the demographic and economic conditions in Hungary). According to the financial balance of our model, the net effect on the state pension budget would be negligible. While the total amount of the pension budget with the changes concerning mothers would largely remain unchanged (according to the forecasts), its structure could significantly favour families raising children and it could have a positive impact on the social preferences of the population.