Report

Report
Of the Pension and Old-Age Round Table on its activities
between March 2007 and November 2009 Budapest, December 2009 Authors and co-authors of the Report or its parts or enclosures: Mária
Augusztinovics, Mónika Bálint, József Banyár, Gábor Barát, Sándorné
Berényi, Rudolf Borlói, Csaba Fehér, Róbert Iván Gál, László Hablicsek,
Dániel Havran, Éva Hegyesiné Orsós, Péter Holtzer, András Horváth, Gyula
Horváth, Erzsébet Kovács, János Köll?, Levente Máté, Ágnes Matits, József
Mészáros, Gyögy Molnár, György Németh, Ferenc Rába, János Réti, Ádám
Rézmovits, Ágnes Varga.
Contents INTRODUCTION
PART ONE + INTRODUCTION AND THE FOUNDATION OF THE IMPACT ANALYSIS
1. Profile and activities of the Pension and Old-Age Round Table 11
1.1. Some main findings made by the Report 15
1.2. Content and chapters of the Report 19
2. Constraints 21
2.1. Initial status: "The current pension system", point of
departure for the model and uncertainties in the system in 2013
22
2.1.1. The current system 22
2.1.2. Modifications after 2006, to be applied in the model 23
2.1.3. Uncertainties of the situation in 2013 26
2.2. Management of disability pension 26
2.3. Forecast of the labour demand and the lack of feedback 27
2.4. Time scope of the impact study 28
2.5. Male-female discrepancies 30
3. Methodological bases of the impact study 31
PART TWO + RESULTS OF THE IMPACT ANALYSIS
4. Comparative results of the social and economic impact study
conducted by the Pension and Old-Age Round Table 33
4.1. Criteria, options studied 33
4.2. Versions of pension structures studied by the Pension and Old-
Age Round Table 38
4.3. Parameters set for the paradigms 41
4.4. Main findings of the study of social and economic impacts 43
4.4.1. Demographic bases 43
4.4.2. Employment bases 45
4.4.3. Main differences among the approaches applied by the
paradigms investigated 50
4.4.4. Relative pensions 50
4.4.5. Age profile and age centre 55
4.4.6. Contribution levels 58
4.4.7. Requirements of financing by the Central Budget 63
4.4.8. Coverage 66
4.4.9. Role of pillars as the sources of pension 69
4.4.10. Volume of pension expenditures 70
4.5. Summary evaluation of the impact study 71
PART THREE + FURTHER ACHIEVEMENTS OF THE ROUND TABLE
5. Timely issues in maintaining records of the data required as a basis
for the determination of eligibility and the amount of pension 83
6. The Position of the Pension and Old-Age Round Table about the main
issues related to the mixed pension system and the second pillar 84
7. Old age affairs 85
8. International review 87
9. How to proceed: on the necessity, possible tasks and institutional
model of a Pension Insurance Advisory Council and on the continuous
development of the pension model. 87
ENCLOSURES 1. Members and permanent guests of the Pension and Old-Age Round Table
90
2. Sessions, agendas of the Pension and Old-Age Round Table 93
3. The current pension system, changes effected in the recent past
(2006 to 2009), year 2013 96
4. About the old age and disability pension schemes 109
5. Estimates concerning the future population and mortality of
disability pensioners 114
6. Socio-demographic preliminary calculations to model the
reconstruction of the pension system. Extrapolation system and
database (László Hablicsek) 126
7. The micro-simulation model used for the impact study (Gyula Horváth)
161
8. Pension right acquisition based on the data of the entire life
career. Report on the data-survey conducted by the Central
Statistical Office (HCSO) and the Central Administration of National
Pension Insurance (CANPI) (Mónika Bálint-János Köll?-György Molnár)
197
9. Foundations of a paradigmatic reform 241
10. General planning principles 244
11. Properties of the pension system used as the point of departure
(NY2006) as reflected by the impact study 247
12. The pension point system (NYpont) (Rudolf Borlói-János Réti) 257
13. Point system and universal basic pension (NYp+a). A concept for the
reform of the old-age pension (Mária Augusztinovics-Ágnes Matits)
276
14. Description of the NDC paradigm (NYndc and NDCtbki) (József Banyár-
Róbert Iván Gál-József Mészáros) 293
15. Description of the universal basic pension (CSAKa) (Csaba Fehér)
313
16. The "natural pension system" (György Németh) 324
17. Timely issues about the records of the data required for the
determination of eligibility and the amount of pension 340
18. Position of the Pension and Old-Age Round Table concerning the main
issues related to the mixed pension system, the second pillar 344
19. Relationship between the policy of old-age affairs and the policy
about ageing (Éva Orsós Hegyesi) 349
20. Pension paradigms in the OECD countries. An international overview
for the Pension and Old-Age Round Table (Dániel Havran) 368
21. How to proceed? On the necessity, possible tasks and the
institutional model of a Pension Insurance Advisory Council and on
the continuous development of the pension model. 463 Introduction This Report is going to present the main statements elaborated by the
Pension and Old-Age Round Table between 2007 and 2009. In the focus of this
work we find the methods that during the period ending in 2050 could
improve the determinant properties of the Hungarian pension system
(fairness, transparency, financing, coverage, adequacy and sustainability).
In the coming four decades two large waves, the baby-boom generation and
their children (the "echo") will retire. Given a fertility rate that is
constantly low (it is currently 1.3 that should be compared with the self-
reproduction rate that is somewhat in excess of 2), it does not ensure
replacement of those leaving the labour market and will gradually
deteriorate the demographic balance. This is coupled with the level of
activity and employment in Hungary that on the European level can be deemed
very low, which will turn the already unfavourable old age dependency
ratios into almost unmanageable full economic dependency ratios.
The pension system all by itself is unable to remedy these circumstances,
the arena is basically determined by external demographic and labour market
conditions. What circumstances are needed to achieve that many of the
babies unborn today should be born, and to ensure that they when grown up
should be better employed on the labour market are questions that involve
some line policy issues outside the scope of the pension system. Likewise,
the future tendency of labour demand is an issue of economic policy on a
more general level. The pension system itself may have a certain feedback
to these factors but we know very little about the intensity of feedbacks
(e.g. increase in the number of children), or they could hardly be
quantified or modelled (e.g. labour market incentives). Therefore our
Report does not discuss these aspects.
A pension system could within its own frames be changed through tuning its
own parameters and logics of operation. How much and how long is withdrawn
by the system from the active population and how long and on what level
will - on the average and expectedly - the system refund them are
fundamental issues determining many other things. Thus contribution level,
retirement age, rules of pension benefit determination and the rate of
pension indexation are closely interrelated. The decisiveness of
demographical and employment conditions is properly illustrated by the fact
that whilst for the payment of pension benefits that in the European
context can be deemed as very low (HUF 80 thousand, approx. EUR 300 on the
average) very high contributions, making up one third of the gross wages
have to be withdrawn, the deficit continuously grew and the system would
run into a record deficit by the middle of the century save for the changes
of the parameters in 2009 that made the system more or less manageable.
Changes effected recently (deletion of the pension for the 13th month,
restarting the increase of retirement age, modification of the indexation
rules) created a virtual financial equilibrium until 2050. This equilibrium
is virtual, because the persistence of the current situation for the long
term is hardly imaginable. Currently in a very bad employment field,
persons who are too few compared to the entire population pay high amounts
of contribution; the system also contains some nontransparent, untraceable
redistribution; meanwhile the number or proportion of persons precluded
from the system or of those who reach old age without obtaining pension
eligibility also make us concerned. As long as the system is exposed to the
politics to the extent experienced today, it may happen that the lobby
power of various social groups would overturn the equilibrium earlier than
predicted by simple forecasts. The real benefit brought by the changes of
parameters is that we may come up for a quick breath of air and thus we
have some chances to think over the ideas described in the Report, hold
discussions, further investigate important det