Side effects may include
While this measure could boost consumption in the short term and increase revenue from VAT (ÁFA) in 2025, the association sees a negative impact on the economy and people in the long term. The savings accumulated in voluntary pension funds amount to around 2,100 billion forints (approx. 5.25 billion euros), saved by around 1.1 million fund members. As there are many non-paying members with virtually no capital, the average savings in real terms are around HUF 3 million. At today’s property prices, this amount is nowhere near enough to buy a house, even with combined borrowing. Even for the richest 10% of members, the average savings of HUF 8.5 million alone do not appear to be sufficient.
Short-term consumption effect
The association points out that property already accounts for 91% of the total wealth of Hungarian households – the fourth highest figure in the EU. This tends to indicate an underdeveloped rental property market. From the point of view of retirement provision, it does not make sense to redirect capital into residential property. As property has a very limited market value when owner-occupied, pensioners will not be able to realise future increases in value every month. While many countries allow the purchase of property in long-term savings plans, the current government bill has widened the scope of property-related purposes to short-term consumption, which is not common elsewhere. Although the savings can be spent tax-free on renovation work, VAT of 27% applies to the goods and services purchased.
Pension gap gets even bigger
Bamosz warns that participants in the new programme will miss out on the capital they have saved when it comes to topping up their pensions. Last year, the state pension scheme paid out a total of 5,770 billion forints, while the contributions of active employees brought in 1,400 billion forints less. Demographic trends suggest that this imbalance will increase in the future without pension reform. Pension provision should be subsidised instead of using up existing savings, which are already too low, for purposes other than those intended. The majority of pension fund investments (well over 50%) are in domestic assets. According to estimates, a withdrawal of capital from the funds could lead to the sale of Hungarian securities worth several hundred billion forints in 2025.
Bamosz represents the domestic investment fund and asset management industry. Its 24 members manage a total of 21,900 billion forints in assets, including around 16,900 billion forints in investment funds.