Proposed legislation said to mean end of private pensions

EU

The National Economy Ministry submitted proposed private pension regulations that it says will protect assets, while industry observers say the rules would essentially eliminate private pension funds, news agency MTI reported yesterday.

According to the statement, new rules would be set up in order to facilitate the operation of viable private pension funds and strengthen their transparency. The proposal calls for the termination of private pension funds in which fewer than 70% of members pay their mandatory monthly fees, the ministry said. The ministry acknowledged that, according to statistics from the National Bank of Hungary (MNB), only a few thousand private pension fund members currently pay their mandatory monthly fees.

In 2011, before a change in the law forced many people to switch to public pensions, private pension members paid an average HUF 10,000 per month, and that amount has decreased to HUF 500, which means that pension funds are using up assets and jeopardizing future pension payments. "The government had to act decisively in this situation as the pensions of about 60,000 private pension fund members are in jeopardy," the statement added.

Horizont Private Pension Fund believes that although the current text of the bill is ambiguous, the proposal actually calls for voluntary liquidation of all private pension funds, the fund said in a statement to Hungarian news portal origo.hu. "If we interpret [...] the text to mean that pension fund members' fee payments must be examined retroactively from the enactment of the law, that is presumably from January 1, 2015, it is presumably clear to the author of the legislation as well that none of the pension funds currently in operation meet this condition" the statement says. A recent survey reveals that 95% of private pension fund members still believe they made the right decision by staying in the private pension fund system and want to remain private pension fund members.

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