Reversals of Systemic Pension Reforms in Central and Eastern Europe: Implications for Pension Benefits
Abstract:Since the late 1990s, some central and eastern European countries reformed their pension systems structurally, partly replacing their PAYG‐financed public pensions, with fully‐funded, defined contribution plans. During the crisis, some of these have been partially reversed, with reductions in contributions to the funded, private pension system in countries such as Estonia (temporary) and Poland (permanent). In Hungary, the reversal has been complete. Even the accumulated assets in the mandatory pension funds were reverted to the state. The analysis of pension entitlements shows that the main cost of these reversals will be borne by individuals in the form of lower benefits in retirement. The effects on the public finances will be a short‐term boost from additional contribution revenues but a long‐term cost in extra public spending just as the fiscal pressure of population ageing will become severe. Overall, however, it is projected that the extra revenues would exceed the extra expenditure.
Document Type: Review Article
Publication date: June 1, 2012