“And what if the 20% is abolished?” – this question comes up in almost every conversation before a policy is taken out, and rightly so. With a contract running for 20–30 years, the survival of the tax rule in force at the start cannot be taken as a given. As a broker, I cannot make promises on the legislator's behalf, and I do not make any; what I can show you is what is in the law, what is in your insurance contract, and what earlier amendments teach us. Separating the two gives a clear picture: the credit is a matter of tax law, the contract a matter of private law.
- The 20% credit has been granted by Section 44/C of the Personal Income Tax Act (Szja tv.) since 2014: what one law grants, another can amend – it contains no expiry date, but nothing fixes its continuation either.
- Hungarian tax law has changed allowances before: the pre-2010 life insurance allowance was abolished, and in 2014 the rate for pension funds fell from 30% to 20% – the contracts did not end as a result; the level of support changed.
- A basic principle of law-making is the prohibition of retroactively increasing burdens (Section 2 of the Law-Making Act, Jat.): taking back amounts already credited is not typical, but future payments are governed by the rule in force at that time.
What provides the credit, and what does not?
The pension insurance tax credit is laid down in Section 44/C of Act CXVII of 1995 on Personal Income Tax (Szja tv.): the policyholder may designate 20% of the premium paid in the tax year, up to HUF 130,000, out of their personal income tax after allowances, within the joint ceiling of HUF 280,000 under Section 44/D. The rule entered into force on 1 January 2014 with the tax package adopted in autumn 2013 and – an important detail – applies to pension insurance policies taken out from 2014 onwards. In other words, right from its introduction the legislator tied eligibility to the date the contract was concluded. The HUF 130,000 ceiling has remained unchanged since its introduction in 2014 – including for the 2026 tax year. What is worth stating clearly, however, is that the credit does not appear in your policy. The insurance contract is a life insurance contract under the Hungarian Civil Code (Ptk.), whose benefits – the pension benefit, the death benefit and the health-impairment benefit – exist independently of the tax rule; the insurer cannot make any promise about the credit, and the policy conditions typically say so explicitly.
What do earlier amendments teach us?
Three lessons emerge from the past twenty years of Hungarian regulation. First: an allowance can be abolished. The tax allowance linked to insurance premiums that existed before 2010 was removed by the legislator in a single step from 2010; the contracts remained, the allowance did not. Second: both the rate and the ceiling can move, even in opposite directions. In 2014 the designation rate for payments into voluntary pension funds fell from 30% to 20% while the ceiling was raised, and the pension insurance credit was created at the same time – the current limits of the three supported forms are shown in the article on tax credits side by side. Third: changes typically look to the future, and the legislator tends to separate old and new contracts – the 2014 introduction was exactly like this. Incidentally, in recent years it is not the credit but the tax side that has moved: since July 2023, interest income from insurance has also been subject to social contribution tax (szocho), but this too distinguishes by the date the contract was concluded.
What would happen to an existing policy if the rules were amended?
It is worth thinking through the three scenarios in principle. If the rate or the ceiling changes, this affects the designation for the following tax year; the policy and earlier credits are untouched. If the credit were abolished only for new contracts, existing ones would continue under the old rule – this is the 2014 pattern. If it were abolished for all contracts, the policy would still not end: the savings keep working, the benefits remain in place, only the annual credit stops – and under the flexibility rules the premium can be adjusted to a situation without the credit, through a premium reduction or a premium holiday, without having to exit. The fourth, often forgotten case is the opposite direction: raising the ceiling or changing the rate is also an amendment of the law, and likewise takes effect from the following tax year. Under the current rules, repayment of credits already received is due in only one case: if the policy ends without a pension benefit, for example through surrender – in that case they must be repaid increased by 20% under Section 44/C(8) of the Szja tv., as the article on surrender sets out item by item. The framework for law-making is set by Section 2(2) of Act CXXX of 2010 on Law-Making (Jat.): legislation may not impose obligations for the period before its entry into force, may not make obligations more onerous and may not withdraw rights. This is no assurance that the credit will remain, but it is a strong barrier against retroactive withdrawal. Another rule, the freezing of the retirement age applicable at inception, also shows that the system is built on protecting the position at the time of entry.
How to plan without relying on the credit
The essence of pension insurance is long-term, goal-linked saving; the credit speeds this up, but it is not what sustains it. If the plan only stands up with the 20%, then the policy is not worth it without the credit – and this has to be said before taking it out, not ten years later. That is why three tests are worth carrying out. First: is the premium still comfortable in a bad month without the credit? Second: is the cost level – the TKM (total cost indicator) and the costs set out in the policy conditions – acceptable for the remaining term even without the credit? Third: is the policy's flexibility – premium reduction, premium holiday, conversion to a paid-up policy – sufficient to avoid having to exit if the rules change unfavourably? If you are unsure about any of the answers, also read the article on when not to take out pension insurance: it is not the right tool in every life situation.
What should you do?
- Before taking out a policy, also run the numbers without the credit: the decision has to stand up that way too.
- With an existing policy, make continuing it depend on your own goal, not on the tax rule; because of the repayment of credits, exiting is the most expensive reaction to a rule change.
- Once a year, look at the current guidance of NAV (the Hungarian tax authority) and your draft tax return – that is where the limit and the procedure of the designation become clear.
- If your tax situation changes, your accountant can tell you how this affects the designation; with the structure of the policy – premium, who the policyholder is, flexibility options – I help where I can.
No one can make promises on the legislator's behalf. What we can do is choose a policy that makes sense even without the credit, and decide in the knowledge of the legal framework rather than out of fear.
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Sources
- Personal Income Tax Act (Szja tv.) Sections 44/C–44/D (Act CXVII of 1995)
- Law-Making Act (Jat.) Section 2(2) – Act CXXX of 2010 on Law-Making
- Önadózó: Designating tax on pension insurance premiums (contracts concluded from 2014)
- NAV information booklet No. 49: The social contribution tax (16 January 2026) – interest income
- Generali tax information for pension insurance contracts
