The Hungarian Pensions Guarantee Fund

During 1997, and following World Bank advice, the Republic of Hungary introduced ‘second pillar’ compulsory private pensions for new entrants to the Hungarian labour market from June, 1998; voluntary entry was available before that date. The European Commission offered advice under the PHARE Programme, and in respect of Hungary's status as an applicant country to the European Union. This paper reviews the practical matters involved in providing guarantee to contributors subscribing to Private pension Funds in Hungary; the actuarial issues encountered in generating sufficient financial reserves to provide for such guarantees; and the likely impact of EU directives of Hungarian national pension guarantee legislation. The advice was tendered to the Ministry of Finance and the Pensions Guarantee Fund (Penztarak Garancia Alapja) and validated by the European Commission.