Individual pension program

Individual pension program

The voluntary pension fund is the most popular form of pension savings in Hungary.

You are probably browsing my site because you are a foreign national living in Hungary and your employer offered voluntary pension fund contribution in your compensation package. You are in the right place if you are looking for information.

What is a VPF account good for?

  • You or your employer save money to secure your old age living standards
  • You obtain pension upon retirement independent of the unpredictable state social security system (mandatory pay-as-you-go system)
VPF account

How can you access your savings on the VPF account?

  • The contributions belong to you, cumulating on your individual, personal account.
  • The primary purpose of voluntary pension fund savings is to provide financial security in retirement and to raise living standards. VPF accounts are designed to be kept until retirement.
  • Withdrawal upon retirement is possible as a lump sum or as annuity or a combination of the two as described in the law (Öpt, 1993. XCVI.)
  • After a 10 years long waiting period (tĂ­z Ă©ves vĂĄrakozĂĄsi idƑ), it is also possible to request a payment for non-pension purposes. This is the so-called „ten-year option”.

The “ten-year option”

  • After 10 years of waiting, it is also possible to request a payment for non-pension purposes.
  • It is important to note that this is not an expiry date, it is just an option that does not have to be used.
  • You can request a payment at any time after the 10 years have elapsed.
  • After ten years the yields are paid out free of any taxes, but the capital is taxable.
  • Pension funds can of course transfer money to a foreign bank account.
  • Transfers directly to a foreign pension fund account are not possible, as the legislation does not allow it yet. This may change later. 

Investments

  • Your contributions are invested, you can choose from different portfolios
  • The portfolios are designed for different risk-taking abilities.
  • Yields are earned on the portfolios for you.
  • Time is saving’s best friend, due to the compound interest. It is never too early to start putting aside money for retirement.
  • It is easy to follow the investments daily performance via paperless online customer service sites at most VPFs

Tax rules in a nutshell

  • The pension you receive from the voluntary pension fund after retirement is not taxable according to the current legislation.
  • The cumulated savings can be inherited
  • You have an opportunity to claim personal income tax refund, which is 20% of the contributions, maximum HUF 150,000 per annum if certain conditions are met. The tax refund is added to the VPF account.

What if I leave Hungary?

  • Flexible conditions when you leave Hungary, the account becomes dormant.
  • For the suspended accounts some handling fees can only be deducted from the positive yields and never from the capital itself.
  • You have access to your account from abroad, at certain funds the processes are entirely digital.
  • Most funds offer personalised online access to the account’s data.
  • Keep your ÜGYFÉLKAPU (Client Gate) registration to make administration easier.

Summary: Why to join?

The account belongs to you, regardless of the fact that your employer contributed.

If necessary, you may access your account after ten years of membership with special tax rules.

The contributions may be suspended, the account becomes dormant if you leave Hungary.

Tax refund to the VPF account is available for both corporate and individual contributions.

The yields are free of interest tax and the pension paid by the pension fund is tax free.

The minimum monthly contribution is as low as HUF 5 000-15 000 per month..

You may choose from several investment portfolios and you can switch between them.

The account can be inherited by the legal heirs or by the beneficiaries of the member.

How to join?

In most pension funds, you can fill in the application form electronically and sign it electronically using ÜgyfĂ©lkapu (Government Client Portal). With digital signatures, you don’t even need witnesses.

It is important to note, however, that pension funds are subject to strict anti-money laundering rules, which they cannot waive. For this reason, depending on the client’s nationality, they may request copies of several personal documents.

To be eligible for the benefit, your employer (HR department) will probably ask you to present your membership certificate. The pension fund will send this to you by post after processing your application form, or you can download it any time later from your own personal online VPF site.

How shall I start the individual VPF program?

Contact us for free consultation.  We have 25 years of experience in the pension fund industry in Hungary, we are glad to answer your questions.

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