The technical and conceptual proposals for developing the social insurance pension system, and within that, the proposals for increasing pensions and modernising the pension sub-systems (old age, disability, and relatives' sub-systems) are elaborated by the Ministry of Health, Social and Family Affairs. It makes proposals on the changes to the social insurance pension system, for increasing pensions, and the pension measures formulated in the government programme. It keeps continuous track of the standard of social insurance pensions, performs analyses and evaluations of the development of the distribution and purchasing power of pensions, and elaborates the provisions related to the pension insurance scheme of international social security agreements.

Matters related to the pension system remained within national jurisdiction also after accession. However, it is important to be able to harmonise national policies in order to implement economic and employment objectives, and not in the least, to strengthen social cohesion. The new open method for EU coordination provides a framework for this, which may be used to promote steps aimed at achieving strategic objectives. After employment policy and social policy, Hungary now joined the European Union's open coordination process also in respect of pension systems.

Challenges expected in the future

The level of pensions may be described by the fact that during the 90's, in the course of the economic transitions, pensions increased at a lower rate than income. Is spite of this, the relative income position of pensioners improved compared to the total population due to the great decrease in employment and the greater devaluation of unemployment benefits and family support. Pensions play a significant role in mitigating poverty, thanks to the pension minimum guaranteed by the social insurance pillar.

The corrections during the 90's and the structural pension reform introduced in 1998 made a part of problems concerning the pension system manageable, while challenges continue to exist in several fields. The challenges to the sustainability of the pension system arising due to the low employment ratio and for demographic reasons will increase in the future. The answers to be formulated in connection with this are: extending the active lifetime, promoting continued work and issues of gender equality within the pension scheme. The shrinking benefit fund and contribution payment evasion continue to be significant problems, therefore strengthening the relationship between contribution payments and benefits and increasing the transparency and predictability of the pension system continue to be objectives to be achieved.

An important goal for the future is to strengthen the guarantee elements of the pension system and to reduce the risks of poverty in old age by permanently ensuring the constant value of pensions. On the other hand, it is important to harmonise the coverage assumption and regulations for the private pension pillar and the state pillar.

Results of the welfare turn in the field of pensions. The most important expected pension measures

In January 2044, pensions increased by 6.3%, taking into account the 6.8% increase in net income and 5.8% increase in prices. If necessary, the pension increase may be adjusted by the pensioner price index corresponding to the consumption habits of the elderly in November 2004.

The total pension increase during the year will be 8.4%, which represents a 2.5% increase in purchasing power, given the 5.8% increase in consumer prices.

In November 2004, surviving spouse's pensions payable in addition to pensions in own right will be increased by another 20%. The implementation of the new increase of surviving spouse's pensions will realise the altogether 50% increase as promised in the government programme, affecting nearly 500,000 persons and providing them surplus of altogether about HUF 35 billion.