How to make the pension system sustainable

A right-wing economist suggests that in order to make the pension system balanced for the foreseeable future, Hungary should return to traditional family-based solidarity. A conservative blogger believes that a wide public debate should be initiated about the future of the pension system.

As a result of the declining birth rate and the aging population, the value of old age pensions is bound to decrease significantly, Imre Boros, a former MDF politician writes in Magyar Nemzet. Boros points out that Hungarians in their thirties can expect lower pensions, unless they decide to have more children. The conservative economist suggests that the problem can only be overcome by restoring the value of traditional intergenerational solidarity common in agricultural societies. Boros contends that the government should help Hungarian families to have more children and also to build up enough resources to help elderly family members. “We have no choice but to return to the traditional and healthy ideas which used to be prevalent in earlier societies.” Boros suggests that this implies lower taxation for families with children.

The blogger Konzervatív Alternativa agrees that the current pay as you go pension system is not sustainable in the long run because of the declining birth rate. As the ratio of inactive to active Hungarians increases, either the retirement age or contribution fees will have to increase in order to maintain the current level of provisions, the conservative blogger argues. These steps, however, would increase the burden on future generations and also slow down economic growth, he notes. If the state, on the other hand, finances pensions from loans, the country can easily go bankrupt. “As the stakes are high for current and future generations and politicians do not seem to be interested in openly facing the issues, public deliberation on the pension system would be timely,” Konzervatív Alternatíva concludes.

Tags: demography, pensions