What is Private Pension?
Private Pension is a long-term investment designed for retirement. You contribute monthly and, in the future, redeem the accumulated value (with returns). It’s a complement to the INSS retirement.
PGBL vs. VGBL
| PGBL | VGBL | |
|---|---|---|
| Deducts IR? | Yes (up to 12% of income) | No |
| IR on redemption | On total value | Only on returns |
| For whom? | Those who file a complete tax return | Those who file a simplified tax return |
Taxation Tables
Progressive (better for small redemptions)
- Same table as salary (0% to 27.5%)
Regressive (better for long term)
| Term | Rate |
|---|---|
| Up to 2 years | 35% |
| 2 to 4 years | 30% |
| 4 to 6 years | 25% |
| 6 to 8 years | 20% |
| 8 to 10 years | 15% |
| Over 10 years | 10% |
Advantages
- Tax benefits (PGBL)
- Does not enter into inheritance (succession planning)
- Monthly investment discipline
- 10% rate after 10 years (regressive)
Disadvantages
- High administration fees (many funds charge 1-2%)
- Loading fee (some charge on entry)
- Returns may be lower than investing on your own
- Little flexibility
Tip
If you’re going to take out a private pension, choose funds with an administration fee below 1% and no loading fee. Traditional banks tend to charge a lot — prefer independent brokerages.