Hungarian MPs approve pension hike in 2020
Parliament has revised all social security provisions on Wednesday. The key part of these affecting retired people is that as of next July, the rule that only the 15% personal income tax will be deducted from the gross wage (social security contributions are not deducted even now) will be applied also to contractual relations outside classic paid employment.
This means that
in whatever form retired people work, they will not have to pay any contribution on the money made this way as of 1 July 2020.
Norbert Izer told the paper the measure will bring significant savings to those affected, as a gross wage of HUF 100,000 currently leaves only HUF 71,000 in pensioners' pockets once the personal income tax and contributions are paid. If only the PIT is paid, they will be left with HUF 85,000. This HUF 14,000 net income increase translates into HUF 168,000 per year even if the gross earning does not go up, he added.
The state secretary noted that more than 36,000 pensioners currently work outside classic paid employment and the change corresponds to a 19% raise for them. The government calculates that making the pay of these people exempt from contributions leaves them with HUF 20 billion more annually.
Izer thinks that owing as a result of this measure up to 10,000-20,000 pensioners could return to the labour market. He reminded that when the cabinet made earnings for pensioners in classic paid employment free of contributions at the start of the year, their numbers went up from 75,000 to 115,000 by the autumn.
Economic agents would also benefit, as they would be easier to re-hire retired people and people with decades of experience can finally get back into the bloodstream of the economy.
Cover photo by MTVA/on commission by Csaba Jászai
