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Rethinking the Welfare State

The Political Economy of Pension Reform

Edited by Martin Rein and Winfried Schmähl

In this book a distinguished group of contributors discuss the changing political economy of pension reform. They focus on those countries which have launched a significant reframing of their pension system. Each chapter provides a detailed review of recent pension reforms and offers institutional evidence of the extent to which these reforms suggest a redirection of the welfare state towards a more public-private mix of policies. The countries were selected to represent the variety of new directions which mature industrial countries as well as countries in transition have taken.
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Chapter 13: Conflicting Interests in Shaping Hungary’s New Private Pension Scheme

Júlia Szalai


13. Conflicting interests in shaping Hungary’s new private pension scheme Júlia Szalai INTRODUCTION The wholesale movement over the three-year period between early 1998 and the spring of 2001* of almost two million Hungarians (that is, close to 90 per cent of those entitled to do so) to a private pension fund constitutes a major social upheaval. However, despite its enormous significance, both sociologically and politically, it has not yet been properly analysed. The shift reflects a strong desire for change and an implicit criticism of the prevailing social security system. The new legal framework put people – with the exception of those just entering the labour market1 – into the position of having to choose: they had to weigh up whether they should continue to leave the formation of the main financial basis of their pensions (that is, of their livelihood during old age) to the state, or (at least within the limitations of the law) entrust it to some newly established, free-market private pension fund. We know for a fact that the overwhelming majority of those who, at least in principle, have a right to choose, did not choose the comfortable first option (remaining in the state system), but instead decided on the more risky, though at the same time more enticing, second variation. This rather surprising development has yet to receive a thorough scholarly explanation. Moreover, the wave of people switching from one pension system to another, the size and intensity of which has surpassed all...

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