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Hungarian savers say government is stealing their pensions
November 27, 2014 / 6:01 AM / 3 years ago

Hungarian savers say government is stealing their pensions

* Rule change may see private pension funds nationalised

* About 60,000 savers stand to be affected

* Government calls accusations of stealing “foolish”

By Marton Dunai

BUDAPEST, Nov 27 (Reuters) - Hungarian Tamas Merei believes his government is going to take away the $25,000 he has in his pension pot.

“This is theft,” the 39-year-old software developer said as he marched with about 3,000 other protesters to parliament on the banks of the Danube this week to protest against Prime Minister Viktor Orban’s planned changes to pension fund rules.

Orban’s government denies it is stealing anyone’s pension, but the proposal is one of a flurry of financial policies that have critics accusing him of trampling on property rights and economic freedoms to fill up state coffers.

In the past few weeks, the government has proposed a tax on Internet traffic that brought about 100,000 people onto the street in protest; it has put through a tax increase that a German-owned broadcaster says is designed to force it out; and it introduced new levies that foreign supermarkets say discriminate against them.

Before Orban came to power, Hungary had a hybrid pension system, with some funds kept in the state system, while a part of savers’ pension pots was kept in private funds. Employers and workers made mandatory contributions to both.

Soon after he was elected in 2010, Orban’s government ended mandatory payments into the private funds and nationalised most of the money they contained. That effectively allowed the government to take $12 billion in private pension assets. Poland has since made a similar change to its pension system.

Economists and investors were alarmed at the Hungarian move, but the government softened the impact. It said savers could choose to stay in the private funds, although the mandatory contributions would not go to them.

About 60,000 people stayed in the funds. The change the government has now submitted to parliament is that the funds will be closed down, and their assets absorbed into the state pension system, unless at least 70 percent of savers are paying membership fees to the private funds each month.

At the moment, only around 10 percent pay those monthly fees, meaning that the funds would have to close, according to Horizont, the biggest private fund in Hungary.

ILLUSION

The private funds between them have about 200 billion forints ($814 million) in assets, Horizont says.

Economy Minister Mihaly Varga told public radio that people were “foolish” to suggest the government was stealing pensions.

Government spokesman Zoltan Kovacs said that, legally, the pension pots affected belonged to the state, not the savers.

“This is an illusion of having their own money,” he said.

The government did not want the money for the budget, he said, adding that it had to act to protect savers who risked seeing their pensions shrink to nothing because new contributions are not going in.

According to Peter Kreko, director of the Political Capital Institute think-tank, that is a cynical argument used to mask the government’s real motivation. “Essentially it is about plugging budget holes with this money,” he said.

The numbers affected by the pension change are too small to mount a big protest movement and in any case Orban’s grip on power is firm. He was re-elected in April in a landslide, and the left-wing opposition is in chaos.

The protesters say they do not trust the government to pay out the full amount when they retire and fear the money will just disappear into the budget.

Zoltan Vajda, a businessman with three young daughters, has 3.5 million forints ($14,000) in private pension funds.

“These are my last savings,” he told protesters in front of parliament. “The representatives are about to adopt a law that will likely cause our last investments to vanish.”

1 US dollar = 245.9500 Hungarian forint Editing by Christian Lowe and Robin Pomeroy

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