Penson insurance register

Service period entitling to pension benefits

WHAT IS SERVICE PERIOD ENTITLING TO PENSION BENEFITS?

One of the conditions for the establishment of old age and survivor’s pensions is that the applicant or deceased person shall have sufficient service period to qualify for the pension.

The service period is also relevant when applying a benefit prior to retirement age, a life annuity for dance artists and transitional annuity for miners, as these benefits are also subject to the rules applicable to old age pensions.

A person who is in a legal relationship involving an insurance obligation (e.g. an employee, private entrepreneur or member of a partnership) and who pays contributions acquires service period. The law lists these relationships in detail. Examples of insurance relationships are employment relationships, registered foster carers, employed in a public benefit employment program, receipt of a job-seeker benefit, and periods spent as a student in a vocational training school under an apprenticeship contract, agency contract, relationships as an elected official, employment relationships in self-employment, outworker relationship, employment relationships as a member of a cooperative, private entrepreneurs or in business partnership, and small-scale agricultural producer relationships.

The period of payment of certain cash benefits is also regarded as service period. Examples include nursing fee, sickness benefit, rehabilitation benefit or child care allowance.

There are also periods which do not fall into these categories but which the law allows to be counted as service for pension purposes. This includes, for example, former compulsory military service, time spent as an apprentice and years of full-time higher education before 1998.

In view of the above, the types of service period entitling to pension benefits can be grouped as follows:

  • a service period acquired in the case of payment contributions on the basis of a legal relationship involving an insurance obligation
  • periods of receipt of a cash benefit subject to pension contributions,
  • period of contributions paid under an agreement,
  • a period of non-insured employment or a period of non-insured employment the duration of which is considered by legislation as service periods.

The provisions on the recognition of periods of service entitling to pension are contained in Act LXXXI of 1997 on Social Security Pension and in Government Decree 168/1997 (6 October) implementing it, which provide that the provisions on service periods acquired before 1 January 1998 shall be applied by the Authority on the basis of the legislation in force on 31 December 1997.

Whether or not a legal relationship was qualified as an employment relationship involving an insurance obligation is determined in each case by the legislation in force at the time when the relationship arose and at the time when it existed, as follows:

  • Until 31 December 1997, Act II of 1975 on Social Insurance,
  • In the case of a legal relationship between 1 January 1998 and 30 June 2020, Act LXXX of 1997 on Eligibility for Social Security Benefits and Private Pensions and the Funding for These Services,
  • for legal relationships after 1 July 2020, Act CXXII of 2019 on Entitlements to Social Security Benefits and on Funding These Services.

UNDER WHAT CONDITIONS CAN INSURANCE PERIODS BE RECOGNISED AS SERVICE PERIOD ENTITLING TO PENSION?

In the case of private entrepreneurs, members of a business partnership and small-scale agricultural producer, it is not enough to prove the existence of a legal relationship, it is also necessary to fulfil the obligation to submit a tax return and to pay the required pension insurance contribution or pension contribution or social security contribution. Service periods shall not include periods for which contributions are not declared or paid or for which contributions are due. If the pension contribution is paid subsequently, the period not taken into account because of the debt may be recognised as period of service entitling to pension. The amount of the debt and the period to which it relates are certified by the state tax authority.   

As a general rule, the service period is taken into account on the basis of the records of the social security bodies.

If a legal relationship or a period of insurance is not recorded in pension insurance records, documentary or other credible evidence (e.g. witness statements) is required to accept the missing periods.

The existence of an employment relationship may be proved by means of a document issued by the employer at the same time or by means of a certificate based on the employer's original records. In all cases, the burden of proof shall be on the applicant. Service period may be recognised on the basis of other documents and certificates if they clearly establish the fact of insurance and the duration of the insurance relationship.

Evidence based on witness testimony is admissible if the testimony is not contradictory and is from a credible direct source. Examples of direct sources are the testimony of former co-workers or managers who can credibly testify about the establishment and termination of the insurance relationship, its nature and the activities performed by the person concerned.

WHAT ARE THE CASH BENEFITS WHICH DURATION COUNTS AS SERVICE PERIOD?

  • child care fee (GYED),
  • child home care allowance (GYES),
  • child raising support (GYET),
  • child home care fee (GYOD),
  • nursing fee,
  • the law enforcement health impairment supplement and the law enforcement health impairment allowance,
  • the defence health impairment supplement and the defence health impairment allowance,
  • the duration of the payment of the health impairment supplement under the Act on the Legal Status of the Personnel of National Tax and Customs Administration and the health impairment allowance under the Act on the Legal Status of the Personnel of National Tax and Customs Administration,
  • the rehabilitation benefit established after 31 December 2011,
  • the rehabilitation annuity,
  • work rehabilitation allowance and educational development fee,
  • sickness benefit, sick-leave, work accident sick pay, cash benefit after termination of insurance (passive sickness benefit),
  • pregnancy-confinement benefit (TGYÁS), infant care allowance (CSED),
  • adoption fee.

If the benefits listed above were subject to contributions at the time of payment, the Authority will recognise this period of service entitling to pension benefits if proof of the payment of contributions for the benefit in question is provided.

Evidence may include

  • data from the register as declared by the employer,
  • a decision establishing a benefit, e.g. a decision of the National Health Fund or the Hungarian State Treasury or a decision of a government office,
  • entries in the birth certificate of the child at the same time.

WHAT OTHER PERIODS QUALIFYING SERVICE PERIOD ENTITLING TO PENSION?

  • service period recognised on the basis of studies,
  • service period recognised on the basis of military service,
  • service period recognised under other titles

WHAT SERVICE PERIODS ARE RECOGNISED AS PERIODS OF PURSUING STUDIES?

Periods of full-time study at a higher education institution before 1 January 1998 which are necessary for the award of a qualification while pursuing studies are recognised as service periods.

The period of study includes both bachelor and master studies.

Periods of full-time study at a foreign higher education institution are considered as service periods if the certificate or diploma issued under the law of the foreign state is recognised as equivalent in Hungary. Periods of part-time studies abroad at a higher education institution are considered as periods of service if they are included in the period of full-time studies at a Hungarian higher education institution.

Therefore, if the applicant has not completed the higher education abroad or if it has not been included in the period of study at a Hungarian higher education institution, it cannot be counted as service period in Hungary. 

The duration of a PhD course pursued in order to obtain a higher degree related to a higher education qualification is also counted as service period, if the studies were pursued on a full-time academic basis.

The period of study of a doctoral candidate or aspirant candidate who was awarded a scholarship before 1 January 1998 shall also be taken into account as period of study. In this case, the scholarship was considered to be income on which the contribution was based, so in this case it is not the student status of the scholarship holder for the purpose of pursuing doctoral studies, but the payment of the contribution that is the basis for the recognition of the service period as study.

The period of apprenticeship is regarded as service period

  • until 31 March 1995, regardless of whether the student has received a grant or an apprenticeship wage,
  • the period from 1 April 1995 to 31 December 1995 if the student has received a scholarship or a wage or salary (apprenticeship wage),
  • the period spent between 1 January 1996 and 31 December 1997 as a student in a vocational training school under a learning contract, if the student was in a school providing regular vocational training,
  • between 1 January 1998 and 31 December 2019, the period of time spent in a vocational school under a learning contract for which pension contributions have been paid.

For vocational training, an employment relationship is established between the student and the training establishment from 1 January 2020. The student is considered to be an insured person employed in an employment relationship and the period of employment will therefore be recognised as the service period.

 The duration of studies in a vocational school can be recognised as service periods if, by special agreement, the students were covered by the insurance relationship. This is the case, for example, of the duration of studies at a specialised medical school, which may be recognised as service periods for studies begun no later than 1 March 1975.

In the case of vocational schools, only the period of summer practice may be recognised as service periods, if the payment of contributions is proven.

The second year of a two-year police vocational school counts as service periods, since in this case a professional status is established with a trial appointment.

Student relationship under the Vocational Education Act before 1 January 1998 can be proved by an apprenticeship contract, an apprenticeship book or a diploma, and for the period from 1 January 1998 to 31 December 2019, the fact of deduction of pension contributions can be proved by a pay slip, a certificate from the business organisation. The basis for the pension contribution was the fee specified in the apprenticeship contract.

WHAT PERIODS OF MILITARY SERVICE ARE RECOGNISED?

  • periods of military service or civilian service,
  • the period of first actual and reserve service of a conscript member of the armed forces and armed bodies, the defence forces and the river guard.

WHAT OTHER PERIODS MAY BE TAKEN INTO ACCOUNT AS SERVICE PERIODS?

  • the service period of officials of the European Union recognised on the basis of their pension insurance contributions,
  • periods of work experience under the Hungarian-German labour exchange agreement (GDR),
  • the duration of a legal strike,
  • the first 30 days of unpaid leave in the period prior to 1 January 1998,
  • before 1 January 1998, the duration of unpaid leave exceeding 30 days if it was granted for the care of a child under the age of 3 or, in the case of a child with a chronic illness or serious disability, under the age of 12, or for the care of a child under the age of 10.

SERVICE PERIOD THAT CAN BE OBTAINED BY PAYING A CONTRIBUTION BASED ON AN AGREEMENT

Contributions may be made in an agreement with the pension determination body in order to acquire service period:

  • to acquire service and pensionable income (in the absence of insurance or in the case of a break in insurance),
  • for the recognition of periods of full-time education at a higher education institution recognised as service periods after 31 December 1997,
  • for the purpose of acquiring up to five years of service missing from the 20 years required for a full old age pension and the 15 years required for entitlement to a partial old age pension,
  • for the year 1998, for the period of home care equal to the period of child home care allowance.

In the above cases, the period of service acquired under the agreement is recognised if the contribution has been paid.

WHICH PERIODS ARE NOT RECOGNISED AS SERVICE PERIODS ENTITLING TO PENSION?

  • periods of unpaid leave or exemption from work, if no earnings or income on which pension contributions are based have been paid for this period,
  • periods of arrest or imprisonment, except:
      • if the person arrested has been acquitted or the criminal proceedings against them have been terminated by final judgment,
      • the period of imprisonment if the convicted person has subsequently been acquitted by the court,
  • the period during which insurance was suspended, i.e. no contributions were paid,
  • the period of the private entrepreneur's a legal relationship subject to compulsory insurance for which the private entrepreneur is liable to pay pension insurance contributions or pension contributions for the period up to 31 December 2011 and pension contributions from 1 January 2012,
  • in the case of a member of a business partnership, the period of legal relationship subject to compulsory insurance as a member of that business partnership for which the member of the partnership is liable to pay pension insurance contributions or pension contributions for the period up to 31 December 2011 for the members of the partnership who are insured at the time, and pension contributions from 1 January 2012.
  • the period of insurance of a family worker of a private entrepreneur or a member of an unincorporated business partnership for which the private entrepreneur or the unincorporated business partnership is liable to pay pension insurance contributions or pension contributions for the period up to 31 December 2011 for the helping family member and pension contributions from 1 January 2012,
  • the term of the insurance period of the small-scale agricultural producer for which a pension contribution is due,
  • the period of gainful activity as a pensioner in their own rights.

WHICH BODY DETERMINES THE SERVICE PERIOD ENTITLING TO PENSION?

The service period entitling to pension is recognised by the pension insurance administration body in an official procedure in the context of a data reconciliation procedure or, in the case of a claim for benefits, by a decision, in which the whole career is examined.

HOW TO APPLY FOR RECOGNITION OF THE SERVICE PERIOD?

You can find information on this in the Pension insurance data reconciliation procedure.

HOW IS THE SERVICE PERIOD CALCULATED?

Service period is recognised per calendar day and 365 calendar days are considered as one year. The same period can only be counted once.

Therefore, a person who has been insured for several periods at the same time and who has worked for two or more employers on the same calendar day will not acquire any additional service period.

SPECIAL RULES FOR TAKING INTO ACCOUNT SERVICE PERIOD

For health professionals, in addition to the actual service period, additional periods of voluntary overtime in excess of 48 hours per week may be recognised as additional service periods without duration after 1 May 2004. On this basis, 8 hours of overtime will result in an additional 1 day of service. The overtime is certified by the health professional's employer.  

In the case of a survivor's pension benefit, the period of full-time education at a higher education institution is regarded as service period, irrespective of the date of the course.

DOES THE TERM OF SERVICE PERIOD AFFECT THE AMOUNT OF THE PENSION?

The amount of the old age pension depends on the recognised service period and the amount of the average monthly earnings on which the old age pension is based, so in general the longer the service period, the higher the percentage of the initial pension will be of the average net earnings on which the pension is based.

WHAT IS PROPORTIONAL SERVICE PERIOD?

If the insured person's earnings or income on which the pension contributions are based are less than the minimum wage, only the proportionate period of insurance acquired after 31 December 1996 can be taken into account for calculating the amount of the pension.

This means that, for the purposes of determining the amount of the pension, the service period must be calculated in proportion to the earnings on which the pension contribution is based and the minimum wage at the time.

If the conditions for proportional service period are fulfilled, the rules on pro rata service period apply to the following legal relationships:

  • employment,
  • persons performing work for remuneration in any work-related relationship , e.g. agency contract,
  • small-scale agricultural producer activity after 31 December 2007,
  • low tax-bracket entrepreneurs in full-time employment and small taxpayer business status,
  • activity as an elected official,
  • cooperative membership as a member if participating in the cooperative’s activities in person.

WHAT IS THE IMPACT OF PRO RATA SERVICE PERIOD ON THE CALCULATION OF THE PENSION?

The application of the rules on proportional service period means that different service periods are used to determine entitlement to a benefit and to calculate the amount of the benefit.

The service period required to be entitled to a pension is determined by law. For example, 20 years of service period are required to be entitled to an old age pension. To determine whether an applicant is entitled to an old age pension, the total length of recognised service period is taken into account. If the applicant has the minimum service period required to be entitled, the amount of the pension can be calculated. For this purpose, the proportional service period is already used if there was a period after 1996 when the contribution base was below the minimum wage.