Hungary: Teething troubles of pension reform

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Hungary: Teething troubles of pension reform

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Reforming pension systems is one of the greatest challenges faced by emerging markets and developed countries alike. Those that still have to take the plunge can learn something from the Hungarian experience which has been fraught with difficulties.

Hungary's big problem seems to have been that all parties in the system - regulators, funds and participating companies - were overwhelmed. Computer systems were not ready in time at the funds, employers could not keep up with the administration and regulators were slow to react to problems.

"It's not fair to judge the system on its first year," says Roberto Rocha, lead economist for the World Bank's regional mission in Budapest. "The IT question is being solved, the question of enforcement will be solved."

But doesn't the humble Hungarian saver have the right to expect better? Observers say that the rewards will come through eventually and that the new system is a big improvement on the one it replaced.

Hungary's pension reform began in earnest in July 1997.


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