PERSONAL RETIREMENT SAVINGS PLANS
Personal Retirement Savings Plans are long-term financial products that aim at gradual savings until reaching retirement age (66 years and 5 months of age in 2019), generating an additional supplement to the pension attributed by the State.
PPR are part of the third pillar of Portuguese Social Security and the responsibility for this savings is borne by the investor / savers.
The investment principle is simple: You can subscribe to the Retirement Savings Plans, through single or periodic deliveries, with an investment fund management company, a pension fund management company or an insurance company. Generally, the minimum subscription fee is low (in most cases, less than 500 euros) and the capital can be redeemed at once or as a lifetime monthly income.
Retirement Savings Plans can be subscribed by individuals or companies, in this case as a complementary benefit to their employees and take the form of investment funds or insurance.
RETIREMENT AND SAVINGS FUNDS
They are Retirement Savings Plans with characteristics like those of securities investment funds, being managed by securities investment fund management companies. Subscribers can easily follow the evolution of the investment, as the funds are divided into participation units, the value of which is known daily to the marketing entities and must be published at least once a month.
Upon reimbursement, subscribers receive the amounts applied and the total net income generated by the Retirement Savings Plans (taxed at the rate of 8%) and any fees.
However, there is no contractual guarantee:
The final amount (capital and income) depends on the gains obtained by the fund. Prospects and KIIDs indicate the main rules and conditions for the fund's operation, namely the investment policy and the fees to be charged to the participant.
Retirement Savings Plans Insurance
They take the form of insurance policies, but in practice, they are not intended to cover any risk. They are fundamentally financial products, as is the case with capitalization insurance, being managed by insurance companies or pension fund management companies.
As they normally guarantee the capital invested and a minimum income, they require a more defensive strategy, being suitable for savers with a more conservative profile.
For each Retirement Savings Plans traded there is an autonomous fund consisting of public debt securities and other securities negotiable on the stock exchange (for example, shares), acquired by the insurer with the money delivered by the subscribers.
Unlike Retirement Savings Plans funds, it is not possible to follow the evolution of the investment, since, with rare exceptions, the quotes are not published. Insurers annually send an account statement with the accumulated balance, the income obtained by the fund and the fees charged.
What are the tax benefits associated with the Retirement Savings Plans?
Two types of tax benefits can be highlighted: on entry, related to the possibility of deducting part of the amount delivered from collection - currently the deduction of up to 20% is allowed in the Personal Income Tax, with limits depending on age - and on exit, which consist of reduced tax rates at the time of reimbursement.
In what situations can the Retirement Savings Plans be redeemed without penalties?
- - When you turn 60;
- - When you retire due to old age;
- - In case of long-term unemployment (12 months);
- - In a situation of declared permanent incapacity for work or serious illness of the holder or spouse;
- - To amortize your mortgage.
Retirement Savings Plans Companies
Retirement Savings Plans can be subscribed by individuals or companies in favour of their employees.
In recent years, the number of companies offering their employees extra annual remuneration in the form of a retirement supplement has been increasing, with benefits for both parties.
For the company, it is a way of motivating and retaining its employees, while also having the possibility of defining different amounts of PRSP, according to the variable remuneration that it intends to attribute to each one. The amounts spent on PPR are fiscally accepted as a cost, being tax deductible and whenever Retirement Savings Plans represents an extraordinary remuneration it is not subject to the single social rate (social security).
For employees, taxation is reduced and postponed until the moment of reimbursement and is not subject to stamp duty on free transfers of goods. On the other hand, it is possible to increase the invested capital at any time, since the Retirement Savings Plans is in the employee’s name and is an acquired right, and the benefits, such as the conditions for early redemption, is extended to the household (serious illness, disability or unemployment of any of the elements).