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Amendment proposes temporary increase of pension contribution

An amendment submitted to next year's tax bills before the Hungarian Parliament proposes to temporarily raise the pension contribution payable by employees from 9.5% to 10% of gross wages.

The increase, proposed by the parliamentary budget and audit committee last week, would be effective between January 13, 2011 and December 31, 2011.

Prime Minister's spokesman Péter Szijjártó said in a Saturday television interview the governing Fidesz-KDNP alliance would use the extra revenue from the rise to finance an election promise which would allow women to go on pension after 40 years of work.

The increase is expected at around HUF 30-40 billion, press reports said. The proposed amendment has been criticised by all three parliamentary opposition parties.

The period of the higher pension contribution would more or less coincide with the 14-month suspension of the transfer of membership fees into the mandatory private pension funds, recently enacted by Parliament. Under that act, employees' pension contributions as well as their private pension fund membership fees will go into the state pay-as-you-go system between November 2010 and December 2011. The suspension has been contested at the Constitutional Court by the association of private pension funds and, more recently, by opposition party LMP.

Another recently passed act made private pension fund membership optional for career-starters and has offered current fund members an option to return (or transfer) to the state system by the end of 2011. Conditions of the transfer are to be decided by government decree later.

Under the standard rules, employees who are private pension fund members pay 1.5% of gross wages into the state system and mandatorily pay 8% of gross wage into private pension funds. Employers pay an additional 24% of gross wages to the state pay-as-you-go system as pension contribution on employees. (MTI-ECONEWS)