(Bloomberg) -- Hungary plans to allow savers to tap into their private pension funds tax free to buy or renovate property next year.
The draft measure, circulated by the Economy Ministry on Monday, is the latest of Prime Minister Viktor Orban’s stimulus plans before the 2026 general election. His ruling party and the main opposition group are currently running neck-and-neck in the latest polls.
Orban is under pressure to buoy the economy after a contraction in the second quarter, an overstretched budget and with the forint trading near the weakest level in 18 months.
His government is targeting economic growth of between 3% and 6% next year, a tall order given successive misses in recent years and with the German economy — Hungary’s most important trading partner — on the verge of recession.
Tapping Pensions
Tapping pensions is meant to help Hungarians cover the cost of housing or renovations, which have soared following the fastest inflation in the European Union last year. Mortgages are also still prohibitively expensive for many, with the central bank’s ability to reduce the EU’s highest key interest rate limited by a weak exchange rate.
It’s unclear how many people would use the opportunity, nor whether the funds raised will make a significant difference to the economy. There are about 1 million private-pension fund accounts in Hungary, which each contain on average more than 2 million forint ($5,500), according to the ministry.
It’s not the first time Orban’s government sets its sights on pensions for its policy purposes. After returning to power in 2010, his cabinet effectively nationalized private assets from a now-defunct pillar of the pension system to plug holes in the budget.
This time, the government is treading more carefully. The decision to harness one’s private pension savings is voluntary, the ministry said.
(Updates with context throughout)
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