The pension plan in Hungary is set up in four pillars:
The standard retirement age in Hungary is 62 years and six months of age. Twenty years of service is required for both the earnings-related pension and the minimum pension and 15 years of service is required to receive a partial pension. Retirement is not necessary, but many Hungarians choose to take it once they reach retirement age.
The Hungarian pension system is a mandatory, uniform, defined-benefit pay-as-you-go system. The overall contribution rate to the pension plan is 26.5%. Employers pay 18%, which goes into the Pension Insurance Fund. Employees contribute 8.5%.
For the individuals who participate in the mandatory second pillar, the contribution is divided. There will be 7% that goes to individual retirement accounts and 1.5% is allocated to the public pension system.
The pay-as-you-go system has a total contribution of 19.5% of the employee's taxable income. There will be 18% that is paid by the employer and 1.5% by the employee.
The earnings-related pension is 33% of average earnings for the first ten years of coverage. The pension will be increased by adding 2% for each additional year from 11 to 25 years of coverage. For each additional year between 26 and 36 years of coverage, an additional 1% will be added each year and 36 to 40 years of coverage each year adds 1.5%. There is a minimum pension, which is worth 28,500 HUF a month.
There are not many companies that offer pension plans in Hungary. Most companies abide to the state pension plans. However, this is a more common option among expats.
If you are working for an international company or international government, then you should ensure you benefits when overviewing your contact.
The private pension plans in Hungary are under the category of the 2nd pillar pension plan called mandatory individual accounts.
Mandatory pension plans are independent entities owned by their members. They are they legal form of mutual foundations. The fund must have at least 25,000 members if it pays annuities itself. 2,000 members are allowed if annuities are bought from an insurance company. Private pension funds collect the contributions.
A few countries have a bilateral agreement with Hungary that allow for years worked in Hungary to count to their State pension. Inquire with your state plan about the particulars.
If your country does not allow for years worked in Hungary to count toward your state pension, there may be an opportunity to buy back time once you have returned to your home country and are once again contributing to the pension plan. Again, inquire with your state plan about the particulars.
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