Background to the pension insurance recommendation

József Banyáry, Koppany Nagy (), Ferenc Szebelédi (), László Windisch () and Zoltán Zubor ()
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Koppany Nagy: Magyar Nemzeti Bank (Central Bank of Hungary)
Ferenc Szebelédi: Magyar Nemzeti Bank (Central Bank of Hungary)
László Windisch: Magyar Nemzeti Bank (Central Bank of Hungary)
Zoltán Zubor: Magyar Nemzeti Bank (Central Bank of Hungary)

MNB Bulletin (discontinued), 2014, vol. 9, issue 2, 23-35

Abstract: Pension insurance contracts concluded after 1 January 2014 provide eligibility for tax incentives in the context of disposition over taxes. With a view to ensuring that the insurance products available on the market contribute to financial self-reliance, serve customer needs and requirements and comply with the objectives of the legislator, the Magyar Nemzeti Bank issued a recommendation on 26 May 2014. This article summarises the theoretical and practical considerations underlying the recommendation. Our point of departure is that simple, transparent products are best suited to these objectives. The tax incentive alone is a suitable tool for supporting sales and should accordingly be passed on in its entirety as an advantage for customers. Annuities and various combinations thereof are optimal tools for achieving pension objectives, while lumpsum payments are only justified in exceptional cases. In the case of unit linked insurance, special attention must be paid to investments and costs. Long-term savings geared towards pensions should be coupled with life-cycle type investment solutions which contain increasingly lower risk instruments as age progresses, compared to instruments with higher yield potential during the initial period. Customer benefits can only be achieved if excessive costs are avoided, which calls for the introduction and reinforcement of products with better cost indicators compared to those found previously on the market, along with the effective cooperation of intermediaries in disseminating these products among customers.

Keywords: pension insurance; financial consumer protection; total cost ratio; pension annuity (search for similar items in EconPapers)
JEL-codes: G22 (search for similar items in EconPapers)
Date: 2014
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