Banks look to lure pension money

Analysis

Several banks are launching new products in August to try to attract at least some of the extra income Hungarians are getting from the real yield payments made by pension funds following their quasi-nationalization.

Although self-provision is gaining ground in Hungary, repayment of the increased installments of foreign-currency denominated loans will account for the lion’s share of the HUF 233 billion real yields to be reimbursed in August. Banks foresee higher savings only where real yields reach at least a few hundred thousand forints per person. Extra savings are expected to be invested in long-term vehicles, such as long-term investment accounts (TBSz), retirement savings accounts (NyESz) and voluntary pension funds. 

OTP Bank deputy CEO Antal Kovács said at a press conference that over 50% of those receiving refunds are expected to consider saving the extra income. In August, the bank is launching two new products for these customers, including a bank deposit with special interest rates as well as a long-term investment product. As 63% of OTP Private Pension Fund’s former clients have already stated that they want the money on their bank accounts, Kovács hopes that most of the repaid funds will stay in the bank.

K&H Bank is recommending two new closed investment funds with a minimum HUF 100,000 subscription amount to those seeking a suitable vehicle to invest the extra money. Through the longer maturities, the bank aims to promote self-provision and the opening of investment and retirement savings accounts. The state still provides a 20% tax refund for funds deposited in NyESz accounts in 2011, K&H noted.

Budapest Bank will not offer any new products, but it will call its customers’ attention to the importance of self-provision and to its various savings products, especially some regular savings options in August, the bank told the Budapest Business Journal. The bank believes that its most successful investment funds as well as the recently launched Franklin Templeton Selections Fund of Funds will continue to be popular.

Self-provision index disappoints

Hungarians’ attitude towards self-provision leaves plenty of room for improvement, to put it mildly, OTP’s recently launched self-provision index shows, which stood at 36 points at the end of June, on a scale of 0–100. Besides financial issues, the index also incorporates attitudes in the fields of health and environmental protection.

The most shocking finding of the survey was that although respondents were aware that their retirement income will not be enough to maintain an acceptable standard of living, 66% still believe that the government should provide for them after they retire. In addition, 6% of the respondents have a firmly negative attitude towards self-provision, indicating that many still nurse a “stubborn anger” towards savings.

When asked about their reasons for saving, the largest proportion of respondents cited precautionary motives, with 28% saying that they already save and 21% plan to save for unexpected expenses. While 58% prepare a monthly financial plan, only 26% plan ahead for a year and a mere 8% have plans on a 5–10 year time horizon.

OTP’s index will be published every six months to understand what Hungarians think about self-provision and savings. The index was compiled by research company Ipsos Zrt from a sample of 1,000 bank account holders between the age of 18 and 70. The index represents a national sample.

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