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20 years in the EU: how Hungarian pensions have changed compared to other countries

On 1 May 2004, ten new countries joined the European Union, including Hungary. In a series of articles, GKI Economic Research Ltd. examines how Hungary's situation has changed during its 20 years of EU membership, with the help of a series of indicators. The topic of this article is the change in pensions.

Magyarország 20 éve az EU-ban: hogyan változtak a nyugdíjak?-

In Hungary, the average pension was 61 thousand forints in 2004 and 208 thousand forints in 2023 (an increase of 241%). Of course, part of the nominal increase was eaten by inflation, but even corrected for this, there was a 43% increase in real pensions over the previous two decades (equivalent to 1.8% per year).One reason for this is the constant "turnover" of pensioners, with new, higher pensions coming in, and on the other side the death of some of the former pensioners. Another important reason is the emergence of new forms (pension premium, phasing out and reintroduction of the 13th month pension)



Change in average pension, real pension, average earnings and prices, 2004=100%



\"Source.

Format: GKI calculation based on KSH data. Note: left axis: thousands of forints, right axis: %.

GKI GIS data.

Over the past 20 years, the number of pensioners has fallen from 3.1 million to 2.4 million. Although the number of old-age pensioners has increased by 21.5% over this period, the number of people receiving disability, widow's and parent's pensions has fallen. One of the reasons for these falls was the increase in the retirement age to 65 and the introduction of the 40 for women. Despite this, while in 2004 the state spent 9.7% of GDP on pensions, by 2022 the figure was only 8%.



It is also worth looking at the domestic figures in a regional context. In euro terms, Hungarian pensions have risen by 39%, roughly in line with eurozone inflation. We have been overtaken by the Poles and the Slovaks, and we have been falling further and further behind the Czechs year on year. Romanian pensions, measured in euro, will be just below those in Hungary by 2021. This means we have slipped from 19th to 24th place among the 27 EU member states, with only Croatia, Bulgaria and Romania behind us in 2021.



Change in pensions in the V4 countries and Romania (measured in 2010 euros)



Source: Eurostat (2024)

Source.

Pensions at purchasing power parity have risen rapidly in Hungary over the past two decades ( 76%). However, the rate of increase has not been uniform: the rise was largely realised between 2004 and 2013.The value of the indicator fell between 2013 and 2019, before recovering slightly in 2020 and 2021.



The impressive rise in pensions in absolute purchasing power parity terms is overshadowed when comparing our country's performance with that of the region. Romanian pensions in 2004 were less than half of those of Hungarians, but by 2023 they were 37% higher than at home,with the Czechs increasing their lead. Slovak pensioners receive the same pension as Hungarians. Overall, Hungarian pensions in purchasing power parity terms fell from 52% of the EU average in 2004 to 45% in 2021, putting us in 23rd place out of 27 member states in 2021. It is unlikely that these figures will have changed significantly by 2023.



Change in pensions in the V4 countries and Romania (in purchasing power parity, in euros)



Source: Eurostat (2024)\

Source.

Hungarian pension reform on the horizon - read our previous article!



photo: freepik


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