More and more Hungarian insurers offer pension insurance held in euros – in some cases in dollars – and the question typically comes after a period of a weaker forint: “shouldn't I rather be saving for retirement in euros?” As a broker, I see that this decision is often driven by mood, although it comes down to three sober questions: is the tax credit available in the same way, what happens with the exchange rate for the premium, the credit and the payout, and whose goals a euro savings plan really serves. This article goes through these three – without promising returns or forecasting exchange rates, because neither can be done responsibly.
- The tax credit is also available for pension insurance held in a foreign currency: the Personal Income Tax Act (Szja tv.) sets the definition of pension insurance and the conditions for claiming the credit, but does not prescribe a currency – the insurer certifies the premium paid in forints, converted at the exchange rate of the MNB (Hungary's central bank).
- NAV (the Hungarian tax authority) transfers the amount in forints to the insurer, which converts the credit into the contract's currency – the exchange rate, the timing and any conversion charge differ from insurer to insurer, so you need to check this in the policy conditions.
- Currency risk cuts both ways and stays with you throughout: when you pay the premium, when the credit is converted and at payout – a euro contract is for those whose future expenses or income are also in euros, or who are deliberately diversifying, not an “escape route”.
What is “euro” pension insurance, and how is it different?
With pension insurance held in a foreign currency, the premium, the account value, the charges and the benefit are all set in euros (or dollars); with a unit-linked structure, the investment funds available are also denominated in the contract's currency, while with a traditional structure, the insurer manages the savings in the contract's currency in the manner laid down in the policy conditions. An important distinction is that a fund's currency is not the same as the exposure of the underlying investment: a euro equity fund may also hold US or emerging-market shares, so currency risk at the level of the investment is a separate question – this is covered in the article on how funds are classified. The legal framework is the same as for a forint contract: pension insurance is defined in Section 3 point 93 of Act CXVII of 1995 on Personal Income Tax (Szja tv.) – a life insurance policy where the insurer's benefit is linked to the death of the insured person, to becoming entitled to a pension in their own right or reaching the old-age pension age applicable when the contract was concluded, or to a health impairment of at least 40%, and where at least 10 years must pass between conclusion and payment – except in the case of death or a health impairment of at least 40%. The definition says nothing about currency. The total cost indicator (TKM) must also be published for foreign-currency products and, as a cost indicator, can be compared with that of forint products; the return environment is different, however, so do not confuse the TKM with the expected return – how to use the indicator is explained in the TKM article.
Is the tax credit available – and at what exchange rate?
Yes, it is. Under Section 44/C of the Szja tv., the policyholder may claim 20% of the premium paid into pension insurance in the tax year, up to HUF 130,000 per year, solely out of the personal income tax they have paid; the claim is based on the certificate issued by the insurer, which shows the amount paid in forints. A premium paid in a foreign currency therefore has to be converted: according to GRAWE's tax information sheet on pension insurance, effective from 1 January 2025, “the amount serving as the basis for the tax allocation must be converted into forints at the official MNB exchange rate valid on the last day of the tax year”. Another insurer's information sheet may specify a different day, but the essence is the same: the certificate shows a forint amount, and in the tax return this forint amount is the basis for the claim. This has a practical consequence for sizing the premium. The HUF 130,000 cap corresponds to annual payments of HUF 650,000; in euros this is a different amount every year, because the exchange rate moves. With a weakening forint, the same euro premium corresponds to a larger forint amount, and the credit grows up to the cap; with a strengthening forint, it shrinks. If you want to use the allowance precisely, you need to think through the allowance calculation in forints, and it is worth planning with some margin.
How does the forint tax credit get onto the euro contract?
NAV (the Hungarian tax authority) transfers the claimed amount not to you but to the insurer, in forints. The insurer then converts it and credits it to the contract according to its own rules: according to GRAWE's information sheet, for example, the credit is made “in the currency of the contract, as of the first day of the month following the arrival of the tax credit in the bank account”. On which day and at which rate (the MNB rate or the insurer's own rate) the conversion takes place, and whether it involves a conversion charge, differs from insurer to insurer – this can be found in the currency-conversion rules of the policy conditions, and it is worth searching the text for it before taking out the policy. The credit thus goes through two conversions: converting the premium into forints for the certificate, and converting the forint transfer into euros when it is credited. Months may pass between the two, so the euro amount actually credited will not necessarily match what you would have calculated at the rate on the day of payment.
Paying the premium: from a forint account or a foreign-currency account?
In Hungarian practice, the premium on a foreign-currency contract can typically be paid in two ways: from a forint account, where the bank or the insurer converts the premium at its own rate, or from a foreign-currency account, in euros. The first is convenient, but every single premium payment involves a conversion cost and exchange-rate fluctuation: the monthly forint burden changes from month to month. The second is more predictable for those who earn or hold euros, but keeping a foreign-currency account and making foreign-currency transfers come with their own bank charges. This is a particularly practical question for the retirement goals of people working abroad. Indexation is typically also applied in the contract's currency and, depending on the policy conditions, may follow eurozone inflation indicators – which can mean a different pace from the indexation of forint contracts. When sizing the premium, the “comfortable even in a bad month” principle is supplemented here by a margin: the premium should remain payable in forints even if the exchange rate moves against you.
Currency risk cuts both ways – who is it for?
A euro contract does not automatically protect you from anything; it merely shifts the risk. If the forint weakens, the euro savings already in the policy are worth more in forint terms, but the premium paid from forints becomes more expensive; if it strengthens, the opposite happens. On top of this comes the funds' own market risk: a euro equity fund can lose value in euros too, and exchange-rate and market movements may reinforce or cancel each other out. As a broker, I see a euro structure as justified in three situations: if your expenses in retirement are expected to arise in euros (living abroad, property abroad, regular stays abroad), if your income already arrives in euros, or if you deliberately split your retirement assets between forint and foreign-currency elements. Caution is called for if all your future expenses will be in forints and the decision is prompted by a recent exchange-rate movement: in that case, a foreign-currency contract does not reduce uncertainty but increases it. A retirement goal is a long-term matter – over decades, the exchange rate can move a long way in either direction, and no one can tell in advance which way.
Payout and taxation at the end
The tax treatment of the pension benefit does not depend on the currency: once the conditions are met, the payout can be tax-free under the same rules as for a forint contract, and early termination likewise means repaying the credits received increased by 20% and having the gain taxed – GRAWE's information sheet indicates no currency-specific difference here. Whether the payout is made in euros or in forints, and at what rate, is determined by the policy conditions; the repayment obligation arises in forints, because the credit was also made in forints. The method of converting the taxable gain into forints is set by the conversion rules of the Szja tv., based on the MNB exchange rate; the exact day and method can be confirmed by the insurer's tax certificate and your accountant.
What should you do if you are considering a euro contract?
- Put into words why you need the euro: the currency of your future expenses and your income is the argument, not the current exchange rate.
- Look up the currency-conversion rules in the policy conditions for the premium, the credit and the payout – which rate, which day, and whether there is a charge.
- Compare the TKM of a forint and a euro offer over the same term, and check how deep the range of euro funds is.
- Plan the tax credit allowance in forints, with a margin, and size the premium so that it remains payable even at an unfavourable exchange rate.
- If you let me know, I prepare a comparison of forint and euro offers – TKM, conversion rules, funds, flexibility – in a single table; the decision on the currency remains yours.
Euro pension insurance is a tool, not a refuge: it serves those well whose lives will also partly be lived in euros, and it brings unnecessary risk to those who would merely be fleeing a bad month for the forint. The tax credit is available in the same way in both cases – the difference lies in the exchange rate and in who bears its consequences.
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Sources
- Personal Income Tax Act (Szja tv.) Section 3 point 93 – definition of pension insurance; Section 44/C – claiming 20% of the pension insurance premium (Act CXVII of 1995)
- GRAWE: Pension insurance tax information sheet (effective from 1 January 2025) – EUR contracts, MNB exchange rate, crediting the tax credit to the contract
- Telex / G7: How you can get a pension in euros with Hungarian state support… (May 2024)
- Bank360: Euro funds and pension insurance policies on the horizon
