Hungary’s government estimates the state will pay the equivalent of 0.9% of GDP in real yields on pension savings of Hungarians who decided to return to the state pension pillar, the country’s updated convergence program published on Friday shows.
Hungarian members of private pension funds had until the end of January to opt out of a move, along with their retirement savings, back to the state pension pillar. The 97% of members who made the move were promised payment of any yield over inflation on their pension savings.
Assets close to the equivalent of 10% of GDP will be transferred to the state, according to the updated convergence program, although it noted the exact size and composition would not be known until the transfer becomes final on May 31, 2011. The equivalent of 1.8% of GDP will be sued to finance pension and pension-typed spending in 2011.
The transferred portfolio contains government securities worth the equivalent of 4.7% of GDP, thus withdrawing them would reduce state debt by the same amount. Securities from the portfolio worth the equivalent of about 2.4% of GDP will be sold in 2012 and 2013, depending on market conditions, to be used to reduce Hungary’s state debt according to the program.
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