Occupational Pension Retirement Scheme

Voluntary insurance

• Private and public sector employees; plans provided by employer, often based on collective agreement.

General finances

• Fully funded personal pension plans based on contribution payments and capital revenues.

Contribution payments

• Contribution payments are usually split between the employer and the employee (proportions vary).
• Insured persons can voluntarily choose to pay higher contributions; additional voluntary contributions may be made in the form of a lump sum payment or regular instalments; the member may suspend such payments at any time.
• The member shall not be liable to pay additional voluntary contributions for periods when the employer has failed to provide the contribution referred to in the employment contract or collective agreement.

State support & incentivising strategies

• No tax exemptions for employee’s/employer’s insurance contributions.

• The Ministry for Innovation and Technology (Innovációs és Technológiai Minisztérium) and the Central Bank of Hungary (Magyar Nemzeti Bank) supervises the investments and provides rules on information and transparency.
• Pension plans are often administered by the ‘Institutions for Occupational Retirement Provision’ (Foglalkoztatói Nyugdíjszolgáltató Intézmények). Such institutions can be established in the form of a private limited company or as a Hungarian branch office of an occupational retirement provision institution registered in an EEA Member State.
• ‘Institutions for Occupational Retirement Provision’ can be founded and managed by: (a) banks, insurance joint-stock companies, investment firms; (b) an employer or several employers together.

• Often based on reaching the standard retirement age of the social insurance pension scheme; possibility for early pension in case of attested disability.
• Pension entitlement is subject to a given ‘waiting period’, i.e. longevity of membership duration in the scheme (‘waiting period’ is determined by an agreement between employers and the ‘Institutions for Occupational Retirement Provision’).

Pension payments

• Dependent on payment commitment: ‘defined benefit’ or ‘defined contribution’.
• Defined benefit: offering guaranteed retirement benefits for employees.
• Defined contribution: accumulated capital through contribution payments and investment yields, minus administrative costs and costs/fees of pension provider; in case benefits are also based on biometric risks, benefit amount is calculated taking into account the technical interest rate (an interest rate derived from actuarial mathematics, used to discount future benefits in order to determine their present value).
• Pension annuities paid for a defined period, life-long annuity, a lump-sum payment, or a combination of different payment methods.

Taxation and social security contributions

• After 10 years of the ‘waiting period’ the pension payments are not subject to income tax and social security contributions. Prior to the completion of the ‘waiting period’, payments are subject to tax and social security contributions.