Published: November 28 2023
In 2021, Hungarian pension funds saw record-breaking returns, recovering nearly double the losses from the previous year in just nine months. Despite this, the funds continue to operate at a loss and experience a decline in membership.
Record-breaking returns for pension funds
Hungarian voluntary pension funds achieved a historic record of HUF 209 billion in returns on their investments in nine months. This amount significantly offsets the HUF 117 billion loss from the previous year. The funds generated approximately 18% returns on their portfolios, surpassing the inflation rate.
Accumulated savings and investment allocation
Due to the high returns, the total savings accumulated on individual pension accounts exceeded HUF 1.815 trillion, reaching a historical record. The funds made significant investments in Hungarian government bonds, with over 46% of their portfolios allocated to this asset. This allocation contributed to their positive performance.
Decrease in membership
The number of members in voluntary pension funds decreased by 4,000 in the third quarter of 2022, reaching a total of 1.074 million. The decline in membership can be attributed to difficulties in attracting young members and the increasing number of members reaching retirement age or the 21-year membership mark, which allows them to withdraw their savings tax-free.
Despite the positive investment performance, pension funds still operate at a loss. They recorded a minimal improvement compared to 2022, with an operating deficit of HUF 844 million in the first nine months of the year. Increased operating expenses, including rising wages and other costs influenced by inflation, contributed to this situation. The funds were unable to fully offset these expenses, despite the increase in revenue and the collection of fees from non-paying members.
Questions & Answers
What were the returns like for Hungarian pension funds in 2021? The Hungarian pension funds had record-breaking returns in 2021, nearly recovering double the previous year's losses in just nine months.
How much profit did the voluntary pension funds achieve in nine months? The voluntary pension funds achieved a result of 209 billion forints in their investments in nine months, which is a historic record.
How much did the voluntary pension funds earn in the last 12 months? In the last 12 months, the voluntary pension funds earned nearly 280 billion forints in their investments, resulting in an approximate 18% return on their portfolios.
How much did the individual savings on pension fund accounts reach in September? By the end of September, the amount of individual savings on pension fund accounts exceeded 1,815 billion forints, which is a historical record.
What were the main investment types of the pension funds? The pension funds held over 840 billion forints in Hungarian government bonds, which is their most significant investment, representing over 46% of their portfolios.
Why did the number of pension fund members decrease? The number of pension fund members decreased because it is difficult for them to attract young new members, and more existing members are reaching the retirement age or the 21-year membership period, after which they can withdraw their savings tax-free.
How much were the contributions to the pension funds in the first nine months of the year? In the first nine months, 106.4 billion forints were contributed to the pension funds, which is a record amount, but it did not keep pace with inflation.
How much were the withdrawals from the pension funds in the first nine months? The withdrawals from the pension funds amounted to nearly 109.5 billion forints, which is higher than the amount contributed.
Why did some members leave the pension funds this year? Some members left the pension funds to make one-time payments or to withdraw the accumulated returns, while others had to tap into their savings for living costs.
How well did the pension funds perform financially? The pension funds had a minimal improvement in their operational results, ending the first nine months with a deficit of 844 million forints. The operating expenses increased due to rising wages and inflation.
Did the positive returns compensate for the operational losses? No, the positive returns were not able to compensate for the operational losses. The increase in revenue and the ability to collect fees from non-paying members due to positive returns only amounted to 1.34 billion forints, which is 41 times higher than the previous year.