Zusätzliche Altersvorsorge (freiwillig)

Regulatory Framework

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2000: Government decree 223/2000 on the special features of reporting and book-keeping obligations of voluntary pension funds;

2001: Government decree 281/2001 on investment activities by voluntary pension funds;

1997: Act LXXXII on the establishment and the institutional framework of mandatory private pension schemes (later only voluntary membership possible);

1997: Act LXXX on the coverage and entitlements under the publicly managed social security and private pension schemes.

1993: Act XCVI on Voluntary Mutual Insurance Funds;

1993: Act CXVII on the tax treatment of contributions and benefits.

Plan sponsors

Voluntary pension funds: Voluntary pension funds are independent legal entities owned by their members. Pension funds take the legal form of mutual foundations and may be founded by employers (separately or jointly), chambers of commerce (separately or jointly), professional associations (separately, jointly or with chambers of commerce), employees' interest organizations (separately, jointly or with the above-mentioned entities) or regional governments.

The licensing of voluntary pension funds is issued by the Central Bank of Hungary.

Types of plans

Persons become members of a voluntary pension scheme by joining a voluntary pension fund. These are independent legal entities founded by employers (separately or jointly), chambers of commerce (separately or jointly), professional associations (separately, jointly or with chambers of commerce), employees' interest organizations (separately, jointly or with the above-mentioned entities) or regional governments.

Voluntary pension schemes are defined contribution and contributions are accumulated in individual accounts.

Pension funds may either take the form of closed funds (membership restricted to a certain group of persons with a common characteristic) or open funds (no restriction on membership), regardless of the founder. Closed and open funds are subject to the same legal requirements. Eligible persons may become members of the open pension fund of their choice, or a closed fund if they satisfy the relevant eligibility criteria, without reference to their employers.

Institutional Framework

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Voluntary pension funds: Voluntary pension funds are independent legal entities owned by their members. Pension funds take the legal form of mutual foundations and may be founded by employers (separately or jointly), chambers of commerce (separately or jointly), professional associations (separately, jointly or with chambers of commerce), employees' interest organizations (separately, jointly or with the above-mentioned entities) or regional governments.

The licensing of voluntary pension funds is issued by the Central Bank of Hungary.

There are no minimum capital requirements for pension funds.

The main decision-making body of a pension fund is the general assembly of members, where all members have the same voting and representation rights, independent of the amount of capital accumulated in their respective individual accounts in the fund. The general assembly of members must be convened at least once a year and has, among others, the exclusive rights to:

- modify the deed of foundation;
- approve and modify the fund's bye-laws;
- elect and remove the members and chairperson of the board of directors and the supervisory committee and fix their remuneration;
- approve the directors' annual report and the financial plan for the fund;
- validate claims for damages against persons acting on behalf of the fund and members of the board of directors before the operating licence takes effect;
- designate persons eligible to represent the fund in legal proceedings;
- decide whether to join or leave any organization representing members' interests;
- decide on the dissolution or splitting of the fund or merger with another fund;
- decide on the method of collecting membership fees.

Instead of the general assembly of members, a general assembly of delegates appointed to represent members' interests may perform these functions.

The mandate of the board of directors will last for five years from their election or until the new general meeting establishes a new board of directors.

The members of the board of directors must have unblemished professional and civil records, and have the main responsibility to manage the pension fund adequately in compliance with the applicable legislation, the bye-laws of the fund and the decisions taken by the general assembly. In this framework, the board must prepare the main documents of the fund such as the bye-laws and the financial plan and, once they are accepted by the general assembly, implement them.

The pension fund must have a supervisory committee, the members of which must be appointed by the general assembly of members and in which the members' representatives must form the majority. The supervisory committee has the task of regularly inspecting the accounting, financing and operations of the pension fund.

Annuities may be paid by the fund or by an insurance company.

At least once a year, the fund's supervisory committee must inspect the performance of outsourced activities and ascertain that they are in compliance with the provisions of the contracts.

Coverage

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Covered population

Voluntary pension funds: Membership of is voluntary.

Any person who is over the age of 16, agrees to abide by the provision of the bylaws and agrees to pay membership dues shall be eligible for the fund membership.-

There must be no religious, racial, ethnic, political, age or sex discrimination against fund members.

Enforcement of affiliation

N/A

Financing / Investment

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Sources of funds

Employee contributions

Voluntary pension funds: Voluntary contribution. The minimum contribution is defined by the statutes of the fund.

Employer contributions

Voluntary pension funds: Employers can but are not required to contribute.

Other sources of funds

Voluntary pension funds: None.

Methods of financing

Voluntary pension funds: Funded in individual accounts.

Asset management

Voluntary pension funds: A pension fund may manage its assets itself, or partly or entirely entrust an external asset manager with the management of its assets. The external organization entrusted with the management of the fund's assets may only be an investment firm, credit or financial institution, an insurance company or an investment fund management organization that is authorized by the Central Bank of Hungary (MNB) or that is established in another Member State of the European Union and provides cross-border services according to specific legislation or provides services through a Hungarian branch.

A qualified investment advisor must be appointed and, if the investment portfolio includes property, a property expert.

An investment policy statement must be prepared and approved by the fund's board of directors and reviewed annually.

With regard to the investment of fund assets, prudent person management is explicitly required. The prudent person rule is supplemented by quantitative investment limits.

From 2008 voluntary pension fund can operate an optional portfolio system. In 2018 portfolio choice was currently available in about 15 of the 37 voluntary pension funds (some funds introduced life-cycle portfolio).

Funds must not directly own more than 10 per cent of the registered capital or equity of a business for more than one year.

Pension funds must not have ownership interests in businesses in which the founders of the fund, the employers of the fund members, the donors or service providers of the fund own more than 10 per cent of the shares. Fund assets must be kept by a custodian.

Neither the owners nor the executive officers (or their relatives) of an asset management company may be executive officers and employees (or their relatives) of any of the pension funds that it manages.

The maximum limit on asset management fees is 0.8 per cent a year of the total assets.

Benefit provisions

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Acquisition and maintenance of rights

Private pension funds:
Fund members may have access to the amounts registered in their individual retirement accounts at the end of waiting period (minimum 10 years) and may have access to pension benefits (pension payment) after reaching the retirement age.

Waiting period

N/A

Vesting rules

N/A

Preservation, portability, transferability

Private pension funds: Members may change their pension fund.

The pension fund making the transfer to another fund may charge a fee of up to HUF 3.000 of the sum transferred.

Retirement benefits

Benefit qualifying conditions

Private pension funds: Upon reaching the retirement age, the fund member shall declare in writing whether he/she will

request pension payments in one lump sum or in the form of annuity without paying further membership contributions, or

make a lump sum withdrawal from his/her individual retirement account and request payment in the form of annuity from the remaining part without paying further membership contributions, or

continue paying membership contributions and not request pension payments, or

leave the funds accumulated in his/her individual retirement account and stop paying the membership contributions, or

withdraw a specific amount from his/her individual retirement account or request payments in the form of annuity and shall continue paying membership contributions, or

withdraw a specific amount from his/her individual retirement account or request payment in the form of annuity and shall stop paying further membership contributions

The fund shall make available all options listed above.

Withdrawal of funds before retirement

Private pension funds:

Following the waiting period (at least 10 years) and within the accumulation period, the fund member shall, with respect to access to his/her individual retirement account have the option to:

continue membership in the fund under the same conditions,

continue membership in the fund and, once every three years, withdraw all or parts of the fund in his/her individual retirement account before reaching retirement age

close his/her account and terminate membership

leave the funds in his/her individual retirement account without paying additional membership dues.

Benefit structure / formula

Private pension funds: Defined contribution.

Benefit adjustment

Private pension funds: N/A.

Survivors

Benefit qualifying conditions

Private pension funds: Eligible survivors include surviving spouses, orphans, brothers and sisters, and parents.

The fund member may designate in the application for membership, in a public document or a private document with full probative force a natural person as his/her beneficiary in case of his/her death (beneficiary upon the member's death).

Benefit structure

The beneficiary, upon providing proof of eligibility, shall declare in writing whether he/she will:
- collect his/her share in the full amount,
- leave it, in accordance with the bylaws, in the pension fund in his/her own name with or without the continuation of the payment of the membership due,
- have it transferred to another fund of the same type.

Disability

Benefit qualifying conditions

Before the end of the waiting period, a fund member may choose to receive the accumulated capital from health or mutual aid fund, or a health and mutual aid fund if he/she has at least a fifty per cent disability or suffered health impairment to a rate of at least forty per cent, if no improvement in his/her condition can be expected for at least one year and if he/she is able to provide a certificate from a competent authority.

Benefit qualifying conditions

Private pension funds: N/A

Benefit structure
Private pension funds: N/A

Protection of Rights

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Protection of Assets

Private pension funds: Pension funds are independent legal entities and the pension fund assets are completely separate from the founder of the pension fund.

Fund assets must be kept by a custodian.

Financial and Technical Requirements / Reporting

Private pension funds: There are no specific regulations concerning funding and solvency.

Specific legal requirements apply to pension funds' accounting, actuarial methods, reporting, financial planning, service computation and the use of reserves.

If a pension fund provides annuities itself, internal rules must be established covering all matters necessary for the computation of annuities (procedure and formulae, mortality table, technical interest rates, cost factors, etc.). Unisex mortality rates must be used to calculate annuities. The internal rules on annuities must be countersigned by the pension fund's actuary.

Pension funds must report to the MNB regularly (annually and quarterly) and whenever the situation (e.g. in case of merger or acquisition) or the MNB demands it.

The statement of investment policy must be published on the website operated by the MNB.

Whistleblowing

Private pension funds: If the auditors of a pension fund know that the assets or reserves are expected to decrease significantly, they must notify the board of directors, request the board of directors to convene the general assembly and notify the Central Bank of Hungary (MNB).

If the general assembly is not convened by the board of directors within eight days, the auditor must initiate the convocation of the assembly. If the general assembly fails to pass the necessary resolutions, the auditor must notify the MNB and the county court of territorial jurisdiction.

Standards for service providers

Private pension funds:

All funds must employ an auditor. The appointed auditor (auditing firm) must be registered, must have a valid auditor's license and must have a certificate to audit pension funds.

A fund may appoint an auditor for a maximum of five years and the appointment may not be extended. The same auditor may be appointed once again to the same fund after two years following the end of the previous term.

Fees

Private pension funds: The pension fund must cover its administrative expenses from members' regular contributions. The funds must credit to the safety reserve at least 94 per cent of the contributions. Out of the percentage of contributions, the pension fund is only allowed to deduct expenses relating to the establishment or cessation of membership (with a maximum established by Law).

The MNB does not have the authority to approve the fees agreed and contracted between the service provider and the pension fund. The MNB can only supervise whether the pension fund follows the authorized types of expenses and the maximum fee limits.

Winding up / Merger and acquisition

Private pension funds: In case of liquidation of a pension fund, a liquidator must be appointed and the following measures implemented:

- decisions can only be taken by the liquidator;
- new members cannot be admitted;
- payments underway must be suspended;
- membership contributions may not be collected

At the start of the liquidation procedure, the assets belonging to the pension fund must be transferred immediately to the liquidator. These assets must be handled separately, and can be used to fulfil other liabilities only after fulfilling obligations in respect of members and survivors.

Funds may merge if the general meetings of the funds approve the merger. In the case of an acquisition, the acquiring fund is the legal successor of all rights and obligations of the fund that ceases to exist. In the case of consolidation, the merging funds cease to exist and a new fund is the legal successor of all rights and obligations of the merged funds.

Bankruptcy: Insolvency Insurance / Compensation Fund

There are no legal requirement to create compensation fund.

Disclosure of information / Individual action

Private pension funds: The pension fund must annually disclose the following information on the website operated by the MNB:

the number of fund members at the start and end of the current year,

the ratios showing the allocation of member contributions among fund reserves, and any changes therein in the current year,

the total rate of return of the fund in the current year and the previous years, the opening and closing balance of the fund in the current year,

the percentage breakdown of the total assets of the fund by asset class at the start and end of the current year,

the minimum and maximum percentage breakdown by asset classes defined in the investment policy and the reference index for the year following the current year.

Pension fund members must be notified annually (and upon request at any time) of the accumulated amount in their individual accounts. The information must explain the respective sources of the capital (contributions, investment income) and the fees deducted to cover operational and asset management expenses.

Other measures

Voluntary pension funds: None.

Tax Treatment

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Taxation of employee contributions

Voluntary pension funds: Tax allowances for members contribution.

Taxation of employer contributions

Voluntary pension funds: Employers' contribution is taxable.

Taxation of investment income

Voluntary pension funds: Tax-exempt.

Taxation of benefits

Voluntary pension funds: Tax-exempt.

Regulatory and Supervisory Authorities

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Pursuant to the MNB Act, the Magyar Nemzeti Bank (MNB) exercises continuous supervision over the entities and persons covered by laws of the financial sector.

Within this framework, it monitors the activities of financial and capital market institutions, funds, insurance companies and institutions of the financial infrastructure (regulated market, clearing house and central depository), both on-site and off-site, using the tools of prudential supervision (i.e. supervision investigating the business soundness), as well as market surveillance and consumer protection tools, and, if necessary, it takes measures. The purpose of the supervision is to ensure timely recognition and appropriate management of risks in order to avoid that they jeopardize the stability of the system and the confidence of the financial intermediary therein. The information obtained during the continuous supervision is integrated by the MNB in the risk assessment. The data of the risk and institutional assessment determine the method and the intensity of the supervisory treatment of a particular financial institution, as well as the scheduling of further investigations and the focus points thereof.

The Bank monitors the activities of the financial institutions in relation to preventing and combating money laundering and the financing of terrorism, as well as performs IT supervision. If immediate action is required, it will conduct targeted or topical investigation.

The Central Bank is committed to financial consumer protection, as well as to market surveillance intended to eliminate unauthorized, unlicensed financial service providers, or those without prior notification. The MNB takes actions to protect the rights of customers using financial services, and divert the service providers towards a responsible and fair behaviour. It identifies phenomena that are disadvantageous for customers as quickly as possible and focuses on exploring and eliminating their causes, thereby also preventing their repeated emergence. During its consumer protection tests the MNB places system-level consumer protection defects affecting a wide range of consumers in the centre of attention.

The Financial Arbitration Board (Pénzügyi Békéltető Testület, PBT) operating besides the MNB is a professionally independent alternative forum for resolving disputes. The PBT provides a faster and more cost-efficient solution than court proceedings for financial disputes requiring a civil procedure between consumers and the financial service providers under contract with them.

The Central Bank of Hungary
Szabadság tér 9.
1054 Budapest
Hungary

Tel.: (+36) 1 428 2600
Fax: (+36) 1 429 8000

Internet: https://www.mnb.hu

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