EUROPE - Austria's Erste Bank is to shut down its second-pillar pensions business in Hungary due to recent legislative changes in the country.
Last year, the Hungarian government controversially transferred the lion's share of funds in "private" second-pillar pension schemes to the state Treasury in a bid to cut government debt.
In a release, Erste Nyugdíjpénztár (Erste Pension Fund) announced that it planned to discontinue the private pension division from July.
Lajos Mohr, managing director, said: "Changes in the regulatory environment of the private pension sector rendered profitable operation impossible."
He noted that the redirection of contributions to the state-managed fund had left pension funds "without income to cover operations" and "unsustainable in the long run".
The pension provider said it would inform its members about the possibility of transferring funds into the state pillar or receive a payout in the coming weeks.
Mohr stressed that the voluntary pension fund offered by Erste Pension Fund continued to operate and was even growing.
He also said people were now more aware of the importance of saving for their retirement and taking advantage of tax incentives for third-pillar savings.