In Hungary's low interest rate environment, tax benefits have grown in importance and since January 2014, the Hungarian Government has offered support for long term pension saving by offering a 20% tax benefit on pension insurance products. Hungarian GDP has also grown by 3.40% year-on-year compared to 0.90% for the wider European area.
Despite this positive news, in the 2015 Aegon Retirement Readiness Survey , Hungary ranks second lowest in 2015 Aegon Retirement Readiness Index (ARRI) . With a score of 5.1 out of 10, Hungary ranks 14th out of the 15 countries included in our 2015 survey in terms of how prepared they are for retirement.
Hungary's Retirement Index (ARRI) lowest in Europe
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Collapse of Hungarian financial institutions
While pension funds have performed well, there have been concerns recently following the collapse of a number of Hungarian financial institutions, which caused panic in the Hungarian financial markets. This may have contributed to Hungarians being among the most negative nations about both their country's economy and their own short term finances. Almost half (49%) of Hungarians feel insecure about retirement.
Despite the high level of insecurity felt towards retirement in Hungary, there is a lack of consistent saving and retirement planning. Currently, two-fifths (41%) of Hungarian workers do not have any plan for retirement.
Concerns about the future of social security
Clearly there are hurdles to ensuring that workers are able to prepare financially for later life in Hungary. Savers are being squeezed by low interest rates, a feature common to all economies across Europe and North America.
77% of Hungarians believe future generations will be worse off in retirement than current retirees
2015 Aegon Retirement Readiness Survey
Individuals too are concerned about the future of social security and the possibility of retirement benefits being reduced. Perhaps most saliently, a majority (77%) of Hungarians believe future generations will be worse off in retirement than current retirees.
Interestingly, this view increases significantly as people get closer to retirement (from 72% among those aged 18-24, rising to 82% among those aged 45-54).
Women and younger generations are particularly 'at risk' of experiencing low levels of retirement preparedness. For women, the need to balance family and career means that they are more likely to be absent from the job market. 71% of women in Hungary scored a 'low' index ranking (less than six) compared to 62% of men.
For younger workers, it is understandable that retirement preparation takes time. But what is concerning is that successful financial habits are typically not adopted until people move into their late 30s or early 40s.
This is simply too late to secure the kind of retirement people anticipate. With worker expecting to need on average 83% of their working age income in retirement, many people will fall short of this if they defer retirement savings into their 40s.
Low feeling of personal responsibility for their retirement
Heavily reliant on the mandatory state pension, Hungarian workers feel less personal responsibility and are less aware of the need to plan for retirement than workers in all other countries surveyed.
Just over half (54%) feel personally responsible for ensuring they have a sufficient income in retirement. 46% are aware of the need to plan financially for retirement. These attitudes continue to form a barrier to encouraging effective consistent savings habits.
