Pessimistic realistic or aware? – Hungarian youth’s pension expectations

Abstract

Pension awareness is a specific part of financial awareness focusing on material preparation for the years of retirement at an unknown time to start in the distant future. Its starting point is dual: on the one hand, a recognition of longevity risk and, on the other hand, a proper assessment and planning of future options based on the individual’s current financial position. In this study, we wanted to survey the expectations of Hungarian university students about the state pension system, so we conducted online research with questionnaires. Three groups of questions were devised, (i) expectations of the state pension system, (ii) the generosity of the pension system, and (iii) retirement age. Pension-related expectations show that young people, in general, are quite pessimistic and regard the ageing society as the most worrying factor. Expectations about the generosity of pensions are also pessimistic, both in terms of replacement rate and the rate of state pension compared to pensioners’ total income which is estimated lower than it would actually be under the current laws. Expectations of retirement age reflect the European trends; the youth asked typically plan to retire at 65+. We also looked into regional differences and found the youth of Budapest and the Central-Hungarian region were quite negative on every issue while there were differences in other regions. Young people in Northern Hungary have a higher than average positive view of their retirement prospects. The negative attitude can be explained by the lack of transparency of the pension system and limited access to information. Also, because the reform of the state pension system is delayed in this country, respondents have major issues about its sustainability. Our findings can be important input for decision makers to shape the attitude of pension savings and retirement preparations.