HUNGARY - The International Monetary Fund (IMF) has said the sustainability of Hungary's retirement system will have to be "reassessed" following a major transfer of second-pillar assets to the state pension plan.
The 18 Hungarian second-pillar funds recently transferred €12bn in assets to the state system after the majority of workers chose to opt out of occupational schemes.
In the wake of this highly controversial move, "pension sustainability needs to be reassessed", the IMF said.
It added: "[IMF] staff warned the authorities against taking comfort in the improvement of the first pillar's short-term cash position and reiterated concerns about the use of some returned pension assets for current spending."
Due to the transfer of second-pillar assets, Hungary will see a budget surplus this year, not least because "government securities previously held by private pension funds (about 5% of GDP) will be automatically cancelled out and thus reduce debt", the IMF said.
However, it added that part of the money would have to be used to "compensate the 97% of contributors who switched back to the first pension pillar for past voluntary contributions and real returns".
Over the longer term, the IMF urged the Hungarian government to step up efforts for a pension reform, which, at the moment, "still lacks detail".