Constitutional Court to discuss transfer of private pension funds before year-end

Issues

Hungary’s Constitutional Court will discuss at its session on December 28 issues related to the transfer of private pension funds to the state earlier this year, the court’s website reveals.

News portal Origo.hu reported in August that the Constitutional Court had prepared draft decisions declaring unconstitutional the stipulations in the private-pension fund law prohibiting those who remained in the funds from receiving state pensions and reclassifying employee pension fund contributions.

Amendments to the Constitutional Court’s authority that come into effect on January 1 will prevent it from making decisions regarding most of the appeals tabled regarding the pension transfer as reviews of the constitutionality of legislation may only be initiated by the government, one-quarter of MPs or an ombudsman from that date. Additionally, the Constitutional Court is prohibited from reviewing matters related to the budget or contributions to the state - with the exception of those that affect basic human rights - until Hungary’s state debt falls to 50% of GDP.

Hungarian members of private pension funds had until the end of January 2010 to opt out of a move, along with their retirement savings, back to the state pension pillar. About 97% of members returned to the state pillar, bringing some HUF 2,946bn in assets with them.

An amendment to the financial stability act tabled by economy minister Gyorgy Matolcsy on Thursday would reopen the option to transfer to the state pension system by the end of next March and would make remaining private pension fund members liable to a state pension as, under another amendement, the 10%-of-gross-wage pension contribution they pay will go in future to the state pension fund.

This changes current legislation under which those who stayed in the private pension funds are not entitled to a state pension and pension contributions paid by their employers - 24% of gross wages at present - goes to the state pension fund. Under current legislation private pension funds are still to receive employee pension contributions which are 10% of their gross wages. Legislation approved in the autumn of 2010 has diverted, however, these contributions to the state for a temporary 14 months.

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