“If I get into trouble, I can only terminate the whole thing anyway” – as a broker, I often hear this sentence, and it hides two mistakes. The first is that most pension insurance policies (Hungarian tax-advantaged pension insurance contracts) allow partial surrender, so you do not have to sacrifice the whole contract for an unexpected expense. The second, more serious one: many people believe that if they take out “only a part”, nothing happens to the 20% state tax credit either. The tax rule, by contrast, makes no distinction between small and large withdrawals. This article shows what the contract allows, what the law says about partial withdrawals, how the gain on the amount withdrawn is taxed, and why insurers have two kinds of ad-hoc (top-up) account – so that you make the decision knowing the full bill, not under pressure. For a comparison of the access rules with other forms of saving, see the liquidity comparison.
- The “full termination or nothing” myth: from many Hungarian pension insurance policies part of the money can also be withdrawn by partial surrender, but for tax purposes this is just as much a non-pension withdrawal as full termination.
- Under Section 44/C of the Personal Income Tax Act (Szja tv.), a partial surrender also triggers repayment of the state tax credits received earlier, increased by 20%, and the gain portion of the amount withdrawn is taxed – depending on the age of the policy – as interest-type income (kamatjövedelem).
- There are two routes for ad-hoc payments: a pension-purpose ad-hoc premium earns the 20% state tax credit but stays in until maturity; according to insurers' product descriptions, the ad-hoc (top-up) account without a tax credit, recorded separately from the pension-purpose part (the “liquid” account), can be accessed without affecting the pension-purpose part and the tax credits – the details vary from insurer to insurer.
Partial surrender: what does the contract allow?
Partial surrender means that the policyholder takes out part of the savings while the contract continues with the remaining value and with premium payments. Hungarian policy conditions typically set limits: a specified minimum amount has to remain on the contract after the withdrawal, the frequency and minimum amount of partial withdrawals may be restricted, and the amount withdrawn is calculated at the value in the surrender table – meaning that in the first years, because of costs, less can be taken out than the account value shows. In several products a partial withdrawal also affects the entitlement to bonus and loyalty allocations, and for part of the regular-premium savings (initial units) it is not possible at all, or only to a limited extent. All of this varies by insurer and by product, so the first step is always the “surrender” and “partial surrender” sections of your own policy conditions, and the second is a written calculation from the insurer of the amount that can actually be paid out. Some contracts also offer a policy loan instead of a withdrawal: formally this is not a surrender, but if the insurer settles the loan or its instalments against the pension-purpose savings, insurers' tax information sheets – as you will see below – treat it as a withdrawal just the same.
The tax price: repaying the tax credits plus 20%
Under Section 44/C of Act CXVII of 1995 on personal income tax (Szja tv.), the tax credits received for pension insurance have to be repaid increased by 20% if the contract ends without a pension benefit, if it is amended so that it no longer qualifies as pension insurance, or if assets that do not qualify as a pension benefit are withdrawn from it – insurers' tax information sheets include here both full and partial surrender, as well as settlement of a policy loan. The rule is not proportional: what has to be repaid is not the tax credit attributable to the amount withdrawn, but the entire amount previously transferred to the contract by NAV (the Hungarian tax authority), increased by 20%. The insurer deducts the amount to be repaid from the payout and pays it to NAV; if the payout does not cover it, the individual has to settle the difference and also report it in their tax return. This mechanism – with an example and the ways of preventing it – is described in detail in the article on the consequences of surrender; here the point fits into one sentence: even a small partial withdrawal triggers repayment of all the tax credits received so far, which is why “I'll only take out a little” is, in most cases, the decision with the worst return. How the contract continues after this, and how you can claim the tax credit on further premiums, is something the insurer's tax information sheet and your accountant can tell you for your own contract.
Interest tax on the part withdrawn: the 3/5 and 6/10-year rules
The other tax consequence of a partial withdrawal is interest-type income (kamatjövedelem). Under Section 65 of the Szja tv., the part of an insurer's payout that exceeds the premiums paid is interest-type income, subject to 15% personal income tax and, for contracts where cover started after 30 June 2023, also to 13% social contribution tax (szocho) – this is explained in the article on szocho. On a partial withdrawal, the insurer determines the portion of premiums attributable to the amount withdrawn using the law's proportioning rule, and deducts the tax as the paying agent. The age of the contract matters a great deal here: according to insurers' tax information sheets, for a single-premium policy half of the tax base is tax-exempt after the third year and all of it after the fifth year; for a regular-premium policy the same applies after the sixth and the tenth year respectively. A condition of the relief is that amounts paid into the contract on top of the regular premium do not upset the classification – which is why it matters how the insurer records ad-hoc premiums.
Ad-hoc accounts: two separate logics, two separate kinds of access
An ad-hoc payment is an occasional amount paid on top of the regular premium. Most Hungarian pension insurance policies accept it in two ways. The pension-purpose ad-hoc premium is part of the pension insurance: it counts towards the base of the 20% state tax credit – up to the annual limit of HUF 130,000, according to the rules for calculating the limit – but in return it likewise stays in until maturity, and withdrawing it triggers repayment of the tax credits just as withdrawing the regular-premium part does. The solution without a tax credit, often called a “liquid” or “free” ad-hoc account, is by contrast intended specifically for shorter-term goals: no tax credit can be claimed on it, but – if the insurer records this account separately from the pension insurance, as non-pension savings – according to insurers' product descriptions a withdrawal from it does not affect the pension-purpose part or the tax credits received. For tax purposes, the information sheets treat an ad-hoc premium recorded separately as a stand-alone single-premium policy – so the shorter 3/5-year interest-tax relief applies to it – whereas an ad-hoc premium that is not kept separate may also worsen the classification of the regular-premium contract. Check three things in your own contract: whether there is an ad-hoc account without a tax credit at all, what withdrawals cost and how often they are allowed, and which account you ask for the amount to go into when you pay it in – this typically has to be indicated on the payment declaration and can rarely be changed afterwards.
What to do if you need money
- Look at the order: the emergency fund and the ad-hoc account without a tax credit come first; reducing the premium or making the policy paid-up comes second – these are not withdrawals, and the details are in the article on the flexibility rules.
- If a partial withdrawal is still needed, ask the insurer for a written calculation: surrender value, tax-credit repayment to be deducted, interest tax and szocho, and the amount remaining on the contract – the net figure is what counts.
- Before taking a policy loan, read the tax information sheet: insurers treat settling the loan against the pension-purpose savings as a withdrawal that triggers repayment of the tax credits.
- For the future: if you regularly have spare money, it is worth putting shorter-term goals into the ad-hoc account without a tax credit, or into another accessible form, from the outset, and leaving the pension-purpose part alone.
- If you let me know, I help where I can with interpreting the calculation and tax information sheet provided by the insurer; you have to sign the declarations yourself, and your accountant can confirm your tax position.
The strength of pension insurance is precisely that access is made harder – but only if the other elements of the system (emergency fund, accessible savings) are also in place. As a broker, I can help with the comparison and with how the contract is structured; the withdrawal figures are determined by the insurer's calculation, and your tax position by your accountant.
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Sources
- Personal Income Tax Act (Szja tv.) Section 44/C (pension insurance declaration, repayment increased by 20%) and Section 65 (interest-type income) – Act CXVII of 1995
- MetLife – Rules on taxation (tax information sheet, 2024–2025)
- Grantis glossary – Ad-hoc account (liquid and pension ad-hoc account)
