Pension yield: we were able to overtake only two states
Our pension income is deplorable compared to other countries, writes a Portfolio referring to OECD data. According to the preliminary data of the Organization for Economic Co-operation and Development (OECD) for 2021, in most of the examined countries, including Hungary, the retirement assets last year, but even then we were only at the end of the queue.
Pension returns adjusted for inflation were the worst in Hungary after Turkey and the Czech Republic.
According to the portal, in addition to rising inflation, the fact that the majority of pension savings in Hungary are invested in bonds can play a role in this.
Pension assets increased
According to the OECD’s preliminary data for 2021, in the second year of the coronavirus, the assets of pension funds continued to grow in almost all countries examined. The data show that among the OECD countries, Turkey (41.2 percent) and Lithuania (31.5 percent) had the strongest asset growth expressed in national currency. There were places where wealth in pension systems is falling, including Chile (-4.5 percent) and Peru (-19.1 percent), which will allow individual billing early withdrawals in 2021 to support people during the coronavirus, and Estonia ( – 15.5 percent) following the reform of the previously mandatory second pension pillar.
Overall, the assets of pension funds in the entire OECD area increased by 8.2% in dollar terms.
In Hungary, pension assets increased by 5.6 in one year by 2021, but with this we were only able to overtake a few OECD countries.
The Portfolio adds that pension funds achieved a nice positive return in nominal terms in 2021. The nominal yield exceeded 10 percent in 17 of the 53 data-providing countries, and was even above 20 percent in Lithuania (20.7 percent), Poland (25.2 percent) and Turkey (22.9 percent).
Inflation is at a 30-year high
If we look at real yields, the picture is no longer so bright: inflation rose to a 30-year high by December 2021 and reached 6.6 percent in the OECD area. Despite this, pension funds still achieved positive investment returns in real terms in 18 of the 27 OECD countries. Poland (15.2 percent), Finland (12.3 percent), Australia (11.1 percent) and Costa Rica (10 percent) were also able to show double-digit real returns.
In contrast, in the OECD area, pension funds registered the lowest real investment return in Turkey (-9.7 percent), where inflation reached 36.1 percent.
In terms of real returns, Hungary performed the third worst after Turkey and the Czech Republic. According to the portal, the fact that last year’s inflation in Hungary was 5.1 percent may also play a role in this, and the equity exposure of Hungarian pension portfolios is also below the OECD average.