Corvinus University of Budapest,
Central Administration of National Pension Insurance, Budapest
Published in: Public Finance Quarterly 2017/3 (p. 411-419.)
SUMMARY: The financing of social security, including its pension and health insurance sub-systems, is closely linked to who the recipients are and what it is that they receive from the system, although in this respect the two sub-systems behave differently. For the financing of healthcare – owing to the large number of redistribution elements therein –, the choice between contribution-based and state financing is practically free, although there may be slight differences here as well. At the same time, under state financing only a citizen-based, equal size and lower amount basic pension is conceivable for pensions. To have a differentiated work pension similar to what we have today, the current contribution-based financing is needed, which does not mean that major reforms are not required to improve the existing system. The article is directly linked to the study by László Árva and László Mádi from last year, which in terms of social security generally recommended transitioning from contribution-based financing to direct state financing, while it failed to clarify that the current pension system would change as a result. In my article, I wished to establish that such a major financing change for pension would result in the radical transformation of the whole of the pension system, which may not be desirable.
KEYWORDS: pension reform, fiscalisation, basic pension
JEL CODES: H51, H55, H75