Hungarian gov't amends rules on pension savings, here are the details!
Under the proposal, the savings may be tapped under the following conditions:
- the use of savings for housing purposes is just an option, i.e. it is at the discretion of the person concerned, thus further strengthening the right to self-determination;
- the savings can be used for a transitional period of one year in 2025;
- use for housing purposes will be tax-free for this one year.
According to the latest data, there were some HUF 2,100 billion in savings in voluntary fund accounts, with the recent growth coming from good market performance in addition to contributions from members and employers.
The proposal considers as a housing objective
- the subsidisation of the repayment or the co-payment of a loan or credit contract for housing purposes as defined in the Credit Institutions Act, as well as
- the subsidisation of the modernisation and renovation of housing located in Hungary.
The condition for the funds to be used for housing purposes is that the dwelling must be owned at least in part by either the member of the private pension fund or his/her spouse or child, or the credit agreement must be for the purpose of acquiring such property.
Under the proposal, support for the modernisation and renovation of dwellings can be provided through the ex-post settlement of invoices and contracts for specific works, materials and equipment, and can be submitted up to three times, thus facilitating larger renovations and modernisations.
Until now, withdrawals from the voluntary pension fund savings could not made before 10 years had elapsed, only if the member retired before the end of the 10-year period (but even then 15% VAT was payable on the capital). Such savings can be accessed tax-free after at least 10 years and upon retirement. The specific tax rules are summarised in the table below:
A few weeks ago, Zsolt Kovács, the ministerial commissioner of the Ministry of National Economy, spoke at a conference of the Pension Fund Association that
for Hungarians, long-term self-care is home ownership, and that everyone starts from the premise that they should have a home.
There is growing evidence that when Hungarians have access to free financial resources, they tend to turn to real estate, he said. At the same time, Hungary has one of the lowest ratios of pension savings and life insurance policies in the household financial savings portfolio.
He also pointed out that fewer than a thousand people are currently receiving annuities, so there is no meaningful financial support for the elderly.
As far as he can see few members are interested in annuities today, so he thinks it would be a real pension saving if the number of annuitants were much higher, which means that
people are not typically saving for retirement in voluntary funds.
According to central bank (MNB) data, there were 1.069 million members of voluntary funds at the end of June, a steadily decreasing number.
Although the Economy Ministry as announced that the public consultation on the draft will be launched today, it is not yet available on the website of either the government or the ministry. Details will be reported in a separate article as soon as the draft is available.
Cover image (for illustration purposes only): Getty Images
