The paper reassesses the sustainability of the reformed Hungarian pension system, focusing especially on whether the introduction of the fully funded pillar in 1998 has led to any improvement in the sustainability of the pension system. After a brief description of the 1997/8 reform of the pension system, the results from simulations with a revised pension model are presented. These show that 1) unless corrective measures are taken, the pension system is unsustainable, with net implicit public liabilities in the system of around 230 per cent of GDP; 2) the series of policy measures taken since the 1997/8 reform account for the major part of the net liability implicit in the pension system - they reflect a policy reversal and run the risk of completely undoing the progress made by the reform in improving the system's sustainability; 3) the funded pillar can help in lowering net implicit liabilities, but only if the transition costs involved in the reform are financed by budgetary adjustment; 4) the returns recorded so far in the private pension funds fall short of expectations and appear to be low in international comparison, too. If such returns persist, the benefits provided by the multi-pillar system will fall short not only of initial expectations, but also of the benefits received from the full pay-as-you-go system..
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