Published: May 04 2023
Hungary's retirement system has ranked 24th in the Allianz Pension Index, which compares the current conditions and future prospects of pension systems in 75 countries worldwide. Over the past three years, the situation for the elderly has worsened slightly while sustainability has improved somewhat.
How the pension index is calculated
The Allianz Pension Index (API) developed by the insurance company evaluates pension systems based on three components: the current economic and demographic situation, the sustainability of individual pension pillars, and the "adequacy" of the pension system through the situation of the elderly. The higher the score, the worse the performance.
Hungary's API scores
Hungary has achieved a total score of 3.7 which is considered average, but there are large differences in each sub-area. Hungary received the best score in terms of the adequacy of the pension system (3.4), followed by sustainability (3.8), while we performed poorest in terms of the demographic and economic situation (4.2). Compared to the previous publication in 2020, the adequacy of Hungary's pension system has slightly worsened, but the sustainability and current economic and demographic situation have improved.
Ranking and comparison with other EU countries
Hungary has slipped five places to 24th compared to the previous analysis, while France has climbed ten places thanks to recent measures aimed at improving sustainability. Denmark has achieved the best score of 2.2, while Romania's pension system is the most problematic with an overall score of 4.3 in the European Union.
Risks for pension systems in the future
In the report, experts call attention to the risks faced by pension systems now and looking forward. Despite the impact of the Covid-19 pandemic, societies are facing drastic aging in the 21st century. The life expectancy at birth could reach up to 84 years in Europe and North America by 2050, and even the global average could reach 77.2 years. The sustainability of the pension system is difficult, and countries have reduced contributions during Covid and inflation crises, creating doubts about funding for future retirees. The situation is further complicated by the increased cost of financing government debt in higher interest rate environments.
Questions & Answers
What did the Allianz report say about Hungary's retirement system? According to the Allianz report, Hungary's retirement system has plummeted to the bottom in Europe, ranking 24th among EU member states.
What is the Allianz Pension Index (API)? The Allianz Pension Index (API) is an index created by Allianz to evaluate the pension systems of different countries. The index considers three components - the current economic and demographic situation, the sustainability of the different pension pillars, and the adequacy of the pension system based on the situation of elderly citizens.
How did Hungary's retirement system perform according to the API? Hungary achieved an overall score of 3.7, which is considered average, but there were significant differences among the component scores. Hungary scored best in the adequacy of the pension system category (3.4), followed by sustainability (3.8), and the worst score was in the economic and demographic situation category (4.2).
What caused Hungary to slip 5 places in the European ranking? Although Hungary's overall score improved by 0.4 points from 2020 to 2023, it slipped 5 places in the European ranking due to the significant improvement in France's pension system, which rose by 10 places. Similarly, Greece, Portugal, Slovenia, and Croatia also progressed ahead of Hungary in the past three years.
Who conducted the Allianz report? The Allianz report is a global retirement report that analyzes the current state and long-term outlook of various pension systems worldwide.
What is the expected life expectancy in Europe and North America by 2050? By 2050, the life expectancy at birth in Europe and North America may reach 84 years, whereas the global average may reach 77.2 years.
Why might people face lower pensions in their old age? Due to the COVID and inflation crises, many countries reduced contributions to pension systems and allowed early withdrawals from pension savings. As a result, many people partially or entirely depleted their savings, which could result in lower pensions in old age.
