The hen lays no golden eggs – thoughts about the pension funds

Abstract

As opposed to what was assumed at the inception of private pension funds in 1998, the funds do not facilitate economic growth; on the contrary, they increase the general government deficit, deteriorate the image of Hungarian economy, and hinder compliance with the Maastricht criteria for euro convergence. Private fund members are far from being secured a higher pension compared to non-members. The world is witnessing a paradigm shift: countries are restricting or terminating their private pension fund systems, and the World Bank has reassessed its position that was clearly supportive of the establishment of such funds. To its current knowledge, it would not recommend that Hungary establish private pension funds. The hen lays no golden eggs, and the most beneficial action would be to discontinue private pension funds. Discontinuation would result in a HUF 500 bn annual reduction in the general government deficit shown, as a minimum, and would decrease government debt by eight and a half percent of the GDP. Should there be no opportunity to discontinue them, the second best option is voluntary membership, allowing members to return to the social security system.