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Those saving for retirement received another blow

Voluntary pension funds achieved an average net return of -6.80 percent – weighted by closing assets – in 2022 – read on the website of the Magyar Nemzeti Bank (MNB) in a published information sheet. Following the performance of the last quarter of last year, 12 of the 73 fund portfolios closed with a positive return at the end of last year. Overall, annual net returns ranged widely, between 8.5 and -14.5 percent. Primarily, the lower risk portfolios performed better.

The value of the 10- and 15-year average net returns, weighted by closing assets, representing the sector’s long-term performance, was 4.37 percent and 4.63 percent, respectively, following the 2022 data. All this means that despite last year’s low returns and high inflation, the funds can still show a positive real return in the future of one and a half decades, and they still have long-term value-enhancing ability.

The average net return of private pension funds last year – weighted by closing assets – was -7.51 percent. A total of 3 of the sector’s 12 portfolios closed the year in the positive range, and 4 (riskier growth) portfolios boast positive real returns in a 10-year outlook.

Last year’s performance of the funds was basically determined by the general devaluation affecting all types of assets due to the more uncertain economic and inflationary environment following the Russian-Ukrainian war, one of the main direct causes of which is the rise in the yield curve on the bond market. This particularly affected longer-term government securities, which are found in a larger proportion in the portfolios due to the investment time period of the fund.

In the case of savings for pension purposes, the unfavorable performance of one year was offset by the periods that produced a favorable return.

Taking into account the low operating and other costs of voluntary funds, which are less than 1 percent, and the 20 percent tax discount on deposits, savings in funds are still considered a competitive form of savings.

Cover photo: Manuel Augusto Moreno, Getty Images