You can also get a HUF 150,000 tax credit a year if you save for retirement

In the next part of our series, we will compare which pension fund offers what to those who have at least 5-15 years left until retirement, so we compare the portfolios that take a more balanced risk and hold equities and bonds in a more balanced way with the ten largest voluntary fund available to anyone. service provider.

Our article focuses on the second part of our series on voluntary fund portfolios, and the next and final part focuses on risk-averse portfolios. The first part can be read at the following link:

What is a pension fund portfolio?

If you want to be a member of a voluntary pension fund, you have to choose from the portfolios available at that provider when you sign up. These have different risks due to their investment policies and the assets they hold.

In general, three major groups can be distinguished: there are equity-weighted, i.e. more risky, portfolios, there are balanced portfolios that hold roughly equal proportions of stocks and bonds, and there are more bond-weighted, ie more risk-averse, portfolios.

The design of portfolios is also related to the level of available returns, so for example, younger savers may want to choose from higher-weighted, more equitable portfolios that promise higher returns and longer investment horizons. On the other hand, those who are already in retirement may want to opt for more cautious portfolios so that a larger market fluctuation does not reduce the savings they have accumulated so far, which can then no longer be “approved” due to the short time left until retirement.

With most volunteer funds, you can only choose one portfolio at a time, but you can switch between them at certain intervals. However, there are more and more service providers where a fund member can already keep their savings in two portfolios at the same time.

What is a balanced portfolio and how old is it worth choosing?

In general, the pension fund portfolios for which equities and other riskier assets, as well as bonds and risk-averse assets, are broadly. For larger voluntary funds, these include balance, balanced and some expert portfolios. Based on the voluntary fund responses sent to the Portfolio, the following investments are included in the balanced portfolios per service provider:

Investment composition of balanced voluntary fund portfolios
Cash portfolio Distribution / composition of investment
OTP Balanced Almost two-thirds of its investments are in government securities, in addition to which about one-third are domestic and international equity investments, as well as foreign bonds. The portfolio benchmark index includes assets with a residual maturity of less than one year and more than one year; its direct foreign exchange exposure may not exceed 60%. The proportion of shares in the portfolio invested in direct equity investments and mutual funds may range from 10 to 40%; it may also include investments in real estate and derivatives.
Allianz Balanced 77% bond + 23% equity (including equity funds)
Aegon Balanced It contains a significant part of government securities, to a lesser extent domestic and international equities: 74.5% Hungarian government securities and bond funds, 23% domestic equities and equity funds, 2.5% other funds
Aegon Expert Absolute Yield Hungarian and international money and capital market instruments. There is no strategic asset allocation, equity bond weights are dynamically changed by the trustee.
Golden Age Balance It includes modest investments in real estate funds and may include investments in derivatives with an absolute return strategy. Portfolio distribution: 15.6% short-term government securities, 45.6% long-term government securities, 14.2% developed world equities, 15.6% emerging world equities, 9% real estate investment certificates.
MKB Balanced 8% BUX index + 3% CETOP20 Index + 3% MSCI EM Index + 4% MSCI EU + 5% MSCI ACWI + 7% HMAX Index + 26% MAX Index + 43% RMAX Index + 1% 3-month BUBOR
Pannonia Balanced 6% BUX index + 4,5% CETOP20 Index + 3% MSCI EM Index  + 4% MSCI EU + 6,5% MSCI World + 6% HMAX Index + 31% MAX Index + 39% RMAX Index
Generali Eldorado Medium 40% RMAX + 30% MAX Comp + 3.5% BUX + 3.5% CETOP (Central and Eastern Europe) + 3.5% MSCI BRIC (USD) + 9% + DJ Euro Stoxx 50 Index (Advanced Europe, EUR ) + 10.5% Standard & Poor’s 500 Index (US)
Generali Eldorado Absolute Yield The portfolio does not have a strategic asset mix, the asset manager dynamically changes the weight ratios of bond equities and other investment instruments within the portfolio and the regional and foreign currency exposure of investments in order to achieve a positive return regardless of market trends.
Premium Direction 2035 Bond 56%, Equity 34%, Alternative Investments 10%
Source: Portfolio collection, fund disclosure

For the above portfolios, it can be generally said that it is recommended for fund members who have at least 5-15 years of age until retirement. Of course, the recommendation is not binding, an older fund member can choose a riskier portfolio, just as a younger member can choose a riskier one.

What are the rules for choosing a portfolio and what are the costs?

As we wrote about in our previous article, funds differ in how often they allow fund members to switch portfolios. There are places where the fund member can even change every month, elsewhere they allow this every 6 months. The following conditions currently apply to the service providers surveyed per cashier:

  • OTP: Members may initiate a portfolio change at any time, but no less than 7 business days may elapse between the two portfolio changes. According to the Articles of Association, a submitted portfolio change request cannot be withdrawn and the savings in the individual account of the fund member cannot be divided between several portfolios. The cost of the portfolio change is 1 thousandth of the amount to be transferred, a maximum of HUF 2,000, which will be deducted from the account balance.
  • Allianz: Switching is completely free and its frequency is not limited, however, frequent portfolio switching can have negative consequences, such as realizing a loss or a lack of return.
  • Aegon: There are no restrictions, members are free to switch portfolios. Portfolio selection is free upon entry. During the membership period, if the portfolio is changed electronically in the online customer service account, it is also free of charge. In the case of written applications, the member must pay a fee of 0.1% of the current HUF value of the invested assets, but not more than HUF 2,000.
  • Golden Age: Fund members have the opportunity to change portfolios every 3 months. The fee for switching the portfolio is generally 1 thousandth of the balance of the individual account, maximum HUF 2,000. The Golden Age is one of the funds where members can share their assets between two portfolios at once.
  • SMEs: Upon entry, all members can choose one of the four investment portfolios currently available free of charge. Individual accounts of non-opt-in fund members are automatically classified by the fund in the Balanced Portfolio. It is currently possible to switch from one existing portfolio to another at the earliest by 6 months, by filling in the portfolio change statement. Incidentally, the range of selectable portfolios at the fund will soon expand, and from the autumn it will be possible to divide the assets between two portfolios.
  • Pannonia: Fund members can switch between individual portfolios or their share ratios up to every 3 months. Even with this fund, you can split your savings between two portfolios at the same time.
  • First: Members can switch portfolios every three months.
  • General: Each fund member can switch portfolios up to every quarter (January 1, April 1, July 1 and October 1). The condition for the portfolio change is that the correctly completed application must reach the fund at least 3 working days before the closing date.
  • Premium: A fund member may notify the fund in writing or by telephone at any time of a request for an individual portfolio change. An individual portfolio change request cannot be revoked. The cost of an individual portfolio change debited to an individual account is one thousandth of the individual account receivable, up to HUF 2,000.
  • Budapest: Fund members can switch portfolios on a monthly basis.

Who is responsible for the investments?

Interviewed by Portfolio For most funds, the fund portfolios are managed by a fund manager within the group, these funds are OTP, Allianz, Aegon, MKB, Pannonia, Erste, Generali and Budapest. However, there are one or two exceptions, these are understandably the Premium and Golden Age Pension Funds, who have no insurance or banking background behind them. Therefore, several fund managers manage portfolios at the two funds:

Premium Pension Fund:

  • Direction – 2035: Walnut Fund Manager

Golden Age Pension Fund:

  • Balance: Amundi Fund Manager, Concorde Securities, Equilor Fund Manager, Walnut Fund Manager

More subdued yields

Last year was not as productive in terms of yield production, the performance of the portfolios examined ranged from 1 to 5% in 2021, but there were also negative returns on the list. Nonetheless, returns have been very good in recent years, with portfolios able to show higher returns in 2019 in particular (the very favorable capital market environment supported yield production in that year).

Net return on balanced voluntary fund portfolios
Cash portfolios Average return over 10 years (2021-2012) 2021 2020 2019 2018 2017 2016
OTP Balanced 7,4% 4,2% 6,2% 12,0% -2,4% 8,6% 7,7%
Allianz Balanced 6,0% -1,8% 3,1% 7,9% -1,4% 6,6% 6,4%
Aegon Balanced 6,1% -2,8% 3,4% 9,7% -2,9% 6,8% 7,0%
Aegon Expert Absolute Yield 6,4% 5,6% 6,6% 7,6% -2,5% 5,1% 5,4%
Golden Age Balance 7,2% 2,8% 4,4% 8,2% -3,3% 5,6% 5,5%
MKB Balanced 6,7% 1,8% 2,0% 8,7% -1,5% 8,1% 6,8%
Pannonia Balanced 5,8% 2,7% 3,4% 8,1% 0,1% 5,9% 6,7%
Generali Eldorado Medium 7,0% 4,9% 4,9% 10,3% -2,1% 6,4% 5,6%
Generali Eldorado Absolute Yield 1,8% 1,1% 2,4% 2,3% 1,5%
Premium Direction 2035 7,1% 4,1% 5,3% 13,5% -0,5%
Source: MNB, Portfolio

Fees between 1.5-2.5%

As we have written about it several times, the MNB announced in October 2019 that it would extend the Total Cost Indicators (TKM), which have long been used in savings life insurance, to voluntary pension funds, so that they are more or less comparable to one of their main competitors, pension insurance. The MNB’s recommendation comes into force on 1 January 2020, and the funds were required to submit their TKM numbers by 28 February at the latest. website also publishes.

A TKMnyp what is new compared to the previous indicators available for funds is that trying to predict forward-looking costs instead of based on past costs. TKMnyp presents the modeled cost of the assumed long-term savings of a fund member.

The indicator also takes into account all indirect costs, with the exception of the one-off fee, such as the cost of switching the portfolio, the possible tax and contribution burden related to the payments, the cost of postal payments.

Looking at the 10-year TKM values, it can be seen that Aegon’s Expert Absolute portfolio has the largest TKM, but Generali’s, MKB’s and Aegon’s other portfolios are also above 2%. Of the portfolios examined the cheapest products in the line are Allianz Balanced, Premium Direction 2035 and Generali Eldorado Absolute Return portfolio.

Although past returns do not provide any guarantee for the future, assuming similar returns for the next 10-year period as the portfolios examined have averaged over the last 10 years, we can say that balanced voluntary fund portfolios also generate ample fees for members.

Nearly half of the examined portfolios were able to show a net return of around 7% or more on average over the last 10 years, the performance of the others is around 6% (Generali Eldorado’s output lags behind the others as it only started a few years ago).

Cover image: Getty Images

Source: – Befektetés by

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