Equal tax treatment for Hungarian IORP

HUNGARY - New Hungarian institutions for occupational retirement provision (IORP) will get the same tax treatment as existing voluntary pension funds and personal pensions, IPE has learnt.

A proposal to change the Hungarian tax law regarding pensions is currently before parliament, however, industry insiders are certain because the IORP law has been passed, this proposal will pass too.

It is the latest development in the much-debated introduction of IORP provisions in Hungary.

At a conference in London last month, Csaba Nagy, managing director of OTP, Hungary's largest private pension fund, asked "why are we obliged to offer another pillar which will compete with the current third or more likely with second pillar?"

It is claimed new pension insurance companies setting up IORP schemes could draw money from third pillar schemes without increasing personal retirement provision.

"But it will create marketing and transfer costs which the pension fund members will have to pay for," Nagy argued.

IPE reported earlier this year the second pillar pension systems in most central and Eastern European (CEE) countries differ from the voluntary occupational pension schemes in western European countries as most CEE schemes are mandatory and assets are not held by the employers.

"Most of the countries that entered the EU after IORP was signed have schemes that are not covered by the directive's framework," said a delegate at the conference in London's Chatham House.

As a result, the CEE states are being required to set up yet another pillar in the pension system to comply with the IORP directive.

Hungary's finance minister is expected to unveil a new pensions vehicle later this year which will ensure the country complies with the directive's requirements.