Concern about the Purchasing Power of Future Pensions

The past few months have brought significant changes in the financial well-being and expectations of the Hungarian population: according to the latest data from the Provident Barometer survey, there has been a dramatic increase in the proportion of people concerned about the existential uncertainty of their retirement years, and short-term economic expectations have also deteriorated noticeably.

Since the summer, the proportion of those who fear that their pension will not be enough to maintain their accustomed standard of living has increased by 5 percentage points, from 22% to 27%, according to the results of a nationally representative survey of 1,000 people conducted by Ipsos Plc. on behalf of Provident. This is a significant change, especially in light of the fact that the proportion of those who fear that their salaries will lose value due to inflation has decreased slightly, by 1 percentage point (from 35% to 34%), while people continue to consider inflation to be the number one existential risk.

When the economic environment changes suddenly — which is currently a fundamental experience for the adult population — the largest group of respondents (41%) seek advice from relatives and friends, but social media influencers, economic analysts and economists, and financial advisors also play a significant role as sources of information. However, a quarter of respondents (26%) do not seek advice at all in such situations.

Among the forms of self-provision, life and accident insurance is the most popular (29% ranked it first), ahead of pension insurance (23%) and health insurance (18%). The popularity of pension savings has increased slightly, by 1 percentage point, since the summer, indicating that this is indeed one of the central issues concerning the population's sense of financial security.

Flexibility has become the most important factor in choosing forms of savings, followed by savings goals and security. Expected return is only fourth in line, which is also a significant shift from the summer, when return was still in first place. Interestingly, security is clearly the most important factor for those over 50, while the expected frequency of payments is also a determining factor for those aged 18-35.

As far as the actual financial situation of Hungarians is concerned, the two extremes are that 11% are struggling with debt, while 9% are able to set aside as much as a third of their income. However, if we combine these figures with data on educational attainment, the picture becomes even more instructive: 17% of those without a high school diploma are struggling with debt (i.e., nearly one in five people in that group), while 18% of those with a college degree are able to save up to a third of their income.

Overall, financial problems define the daily lives of the majority of the population: in addition to the aforementioned 11% of indebted Hungarian adults, a further 43% stated that they usually run out of money by the end of the month and are unable to save – together, these two segments represent 54% of citizens struggling with financial problems and living in uncertainty. Thirty-six percent believe that they can set aside 20% of their income through budgeting. A monthly income of around HUF 700,000 is the threshold at which the ability to save increases significantly: below this level, only 5% of people are able to set aside a third of their income, while above this level, the proportion rises to 22%.

Expectations are well illustrated by the fact that two-thirds of the population expect their purchasing power to decline; this proportion has increased by 2 percentage points to 67% in the last few months. Only 19% hope for improvement, a significant decrease of 4 percentage points since the summer survey.

"The Provident Barometer survey data show that the population continues to view inflation as the number one financial risk, but more and more people are also concerned about the purchasing power of their future pensions. We do not see any significant shift in where Hungarian adults get their information during times of rapid economic change, but financial advisors continue to be an important source of information, especially for groups with little or no education. The tendency to take care of oneself increases with growing uncertainty: in such times, it is even more important for people to have access to reliable information that is relevant to their life situation and facilitates planning through the information channels available to them," according to Márta Pálfalvi, Director of Communications and Corporate Relations at Provident Financial Ltd.