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Parlament approves suspension of transfers to private pension funds, ends mandatory fund membership

Membership fees of private pension fund members will go into the state pay-as-you go pension system for a temporary 14 months under an amendment to the social security law passed by Hungarian Parliament Monday evening.

Parliament also approved an other amendment, which will end mandatory membership in private pension funds for career-starters and allow existing members to join the state pension fund. The motion submitted by an MP of governing Fidesz on the free choice of pension funds will make membership in private pension funds no longer mandatory for career-starters and offers the funds' members the chance to return to the state's pay-as-you-go system up to the of 2011.

The details of the transfer of members and assets from the private pension funds to the state fund will be determined by government decree.

The motion was approved with 293 votes for and nine against.

MPs of the opposition Socialists walked out of the parliamentary session before the vote.

Parliament on Monday approved the government's motion on amending the social security law, allowing the suspension of state transfers to private pension funds for 14 months between November this year and the end of 2011.

The government explained the measure with the need to meet this year's budget deficit target of 3.8 percent of GDP without jeopardising the living standards of the people.

The amendment will temporarily rechannel about HUF 30bn a month from the private pension funds into the state pension system. At present, 1.5pc of employee's gross wage goes into the state system and 8pc goes into the private pension funds as membership fee. The percentage going into the state system will rise to 9.5pc and the private fund membership fee will drop to zero for the temporary 14 months.

This motion was approved by 249 votes, 11 against and 41 abstentions as the governing Fidesz-Christian Democratic party alliance and rejected by the opposition Politics Can Be Different. Radical nationalist Jobbik abstained from the vote while the Socialists walked out of the chamber beforehand. (MTI Econews)