Voluntary Mutual Pension Scheme

Voluntary insurance

• Persons above the age of 16 with taxable income.
• Private and public sector employees through plans provided by employer.

General finances

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

Contribution payments

• Individual insurance: insured persons provide contribution payments and decide on the amount individually.
• Collective insurance: contribution payments paid by employer and employee (proportions vary).

State support & incentivising strategies

• The fund members can get a tax refund of 20% of their contributions to a pension fund paid from their taxed income as a reimbursement to their pension account (maximum amount of reimbursement: HUF 150,000 per year).
• The investment returns of the funds, which are then placed in the individual accounts, are not subject to tax.

• The Ministry for Innovation and Technology (Innovációs és Technológiai Minisztérium) and the Central Bank of Hungary (Magyar Nemzeti Bank) supervise the investments and provide rules on information and transparency.
• Pension plan providers manage pension funds and pay benefits directly to the eligible person.

• Pension entitlement is subject to a given ‘waiting period’, i.e. longevity of membership duration in the scheme; upon reaching the standard retirement age, pension fund members are entitled to pension benefits regardless of the ‘waiting period’ (set at 10 years).

Pension payments

• Accumulated capital through contribution payments and investment yields, minus administrative costs/fees of pension plan provider.
• 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 on pension payments

• Pension payments are not subject to income tax after reaching the standard retirement age of the social insurance pension scheme (some special exceptions apply).
• After 10 years of the ‘waiting period’ and before reaching the standard retirement age, investment yields are tax free, but the capital is subject to tax as it is not used for pension purposes; in each of the following years, 10% of the remaining capital can be withdrawn free of tax and social security contributions; after 20 years of membership, pension payments are not subject to income tax and social security contributions.