There is a big problem with the Hungarian pension increase

András Farkasfounder of PensionGuru News and Portfolio For his column On The Other Hand regular external author in his recent writing reminds us that pensions in Hungary must be increased by the rate of inflation. “Through this, the purchase value of pensions cannot decrease in principle, no matter how high the inflation is. The situation is not so high, because the rules governing the method of increasing pensions do not guarantee that purchasing power will be preserved in the pension),” he assesses the situation. Several of his analyzes on the subject have already been published on Portfolio:

In his analysis, he emphasized that

pensioner poverty is inevitable every year when the increase in national average net income is higher than inflation.

“The disconnection of pensions from employment – pensioner poverty – increases every year when earnings grow faster than inflation. This is true this year as well (the expected increase in earnings can be two or three times faster than the increase of inflation)” – points out the pension expert, who confirms with several factors why the current increase system is based on inflation blowing from several wounds (an increase in January based on the previously created budget estimate and, if necessary, a subsequent correction in the fall).

András Farkas deals individually with what can be expected this year in terms of preserving the value of the pensions.

It clarifies: “according to the latest inflation information from the CSO (published on August 8, 2024) Compared to July 2023, both general and pension inflation were “only” 4.1% – that is, the 6% pension increase at the beginning of the year is more than enough to cover the price increase”. However, the average numbers hide the bitter layers of reality: the retired customer in the store does not have to face a price increase of 4.1%, but much higher prices: in one year, compared to July 2023, sugar by 46.3% , flour by 12.4%, pork became more expensive by 10.7%, cooking oil by 6.5%, and milk by 4.8% – he made a list.

András Farkas his recent analyzes in the Portfolio On The Other Hand column:

“During the pension increase, the declining value of previously established pensions or pensions of pensioners who entered deep poverty (the lowest income tenth) will not be compensated”, – points out the expert .

András Farkas provides more information on the problems and shortcomings of the current pension increase system it can be read by clicking here.