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Start account redemptions reach HUF 663 mln

A little more than HUF 663 million has been redeemed from Start accounts for Hungarian children since their launch in 2006, Finance Ministry state secretary András Tállai said in a written response to an opposition MP posted on the website of Parliament, state news wire MTI reports.

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The amount was paid out in the names of 635 children, Tállai said.

The Start accounts were launched with the purpose of creating savings for children they can use after turning 18 as well as to provide a balance for the receipt of a HUF 42,500 start-of-life subsidy. That subsidy is available to all Hungarian citizens born in the country since January 1, 2006 and to all Hungarian citizens residing abroad born after June 30, 2017.

Parents or relatives of children born before January 1, 2006 may still open the accounts, but they must make an initial deposit of HUF 25,000. Despite the initial deposit requirement and ineligibility for the HUF 42,500 subsidy, these parents and relatives may still buy high-yield Baby Bonds for the account holder. Additionally, they may redeem the Baby Bonds before their usual 19-year maturity, when the account holder turns 18, but no earlier than three years after opening the Start account.

Baby Bonds pay a yield that is three percentage points over the average rate of inflation, or 6.4% at present, making them the highest yield Hungarian government security for retail investors.

For comparison, the annualized yield of the popular Plus Bond, launched last June, is 4.95%, if held for the full five-year maturity.

Tállai said Start accounts are now opened for one in three newborns. More than 200,000 Start accounts are registered at the Hungarian State Treasury and another 160,000 at banks, he added.

The outstanding stock of Baby Bonds reached HUF 79.7 bln at the end of last year, data from the Government Debt Management Agency (ÁKK) show.