differences and advantages for your future

differences and advantages for your future

Are you thinking of creating a Retirement Savings Plan (PPR) but are not aware of What types of PPR are available? Don’t worry: in advance, we give you all the information you need to decide which option that best meets your needs.

In this article, we analyze which PRP typesas benefits of this savings product as well as the points to consider when choosing.

First of all: what is a PPR?

The Retirement Savings Plan is a financial product that has tax benefits and which is designed to promote a greater savings and investment long-term.

Furthermore, it is important to mention that PPRs are not just retirement savings, as they allow you to redeem the money in certain situations of necessity.

For example, you can redeem for pay the housing loan of your permanent residence if you are in default. However, to know the possible penalties in the redemption, read the contract conditions well.

According to the report’s projections The 2021 Ageing Report from the European Commission, there will be an increase in the discrepancy between the last salary and the amount received in retirement.

While, in 2025, the replacement rate could be 84.9%, in 2070, forecasts indicate that it could only be 41.4%. That is, the values ​​that we will receive during the reform should decrease over the years.

Therefore, it is now essential to create savings that anticipate these long-term income losses.

Also read: Should I do a PPR?

What types of PPR are there?

There are PPR with guaranteed capital – Insurance Retirement Savings Plans – and PPR with some level of associated risk – Retirement Savings Plan Funds.

Let’s see the differences between these PPR?

PPR funds

They are a type of PPR that is managed by investment fund management entities and that has different levels of risk; logo do not have guaranteed capital. This is because they are based on participation units with a certain value that fluctuates in the market.

Thus, with this type of PPR, the investor can lose so much part of the amount invested how to earn higher income to what you would earn in PPR insurance.

If you want to opt for this type of PPR is recommended to read the Key Investor Information (IFI), document that allows to know the objectives and investment policy, risk and remuneration profile, charges and historical returns.

PPR Insurance

In this case, in capitalization insurance, hand your money over to an insurance company so that it can be invested in a fund autonomous, which has guaranteed total capital and a minimum return.

Beforehand, insurance companies provide contracts with information on the PPR and, as a rule, refer to:

  • cost rate annual management;
  • commissionswhich can be subscription, transfer or refund;
  • profitability effective;
  • Minimum deposit amountwhich can be monthly.

In summary, the main difference between these two PRP types they are the risk levelsthat are higher in PPR Funds. Therefore, PPR Insurance is the best option if you prefer greater security.

A Insurance and Pension Funds Authority (ASF) indicates how much PPR insurance is yielding. Regarding PPR Funds income, find out through the Portuguese Association of Investment Funds (APFIPP).

Also read: PPR Funds and PPR Insurance: Know the differences

And in practice, what are the benefits?

Having a Retirement Savings Plan allows you to have a stocking up for your retirement or other unforeseen circumstances that can happen in your life.

Os benefits are visible in the long term:

  • Tax benefit per entry of capital: with 20% deduction from IRS collectionwhere the value limit depends on your age.

That is, if you are under 35 years old, you can deduct a maximum of 400 euros if you invest 2000 euros annually. Between the ages of 35 and 50, a maximum of 350 euros is deducted with the condition of applying 1750 euros. Finally, if you are over 50 and invest 1500 euros in your PPR, you can deduct a maximum of 300 euros;

  • Flexibility in the reimbursement of the PPR amount without penalties in the following cases: old-age retirement, age over 60, entry of the holder or one of the members of the household into vocational or higher education if he has expenses in that year, payment of housing credit installments in the case of own and permanent housing, long-term unemployment, inability to work, serious illness, among others. In the first four cases, only amounts in PPR made at least 5 years ago can be redeemed;
  • Exit tax benefitthat is, on redemption: while in other instruments the tax rate is 28%, in the case of PPR, if the amount is redeemed in accordance with the law, and if the holder maintains it for at least five years, The rate can be 8%;
  • Ease of transfer the PPR to another.

Also read: Is there an “ideal” age to start investing in a PPR?

How to choose the most suitable type of PPR for you?

As mentioned above, the Retirement Savings Plan allows you to save for maintain your quality of life during retirement.

Above all, it is important to take into account the characteristics of each PPR so that you can choose according to your needs. Therefore, it must consider these factors when choosing your PPR:

  • Profitability: it is important to know what the long term profitability and opt for a PPR with values ​​above the average inflation rate;
  • Flexibility: possibility of change risk profile without suffering penalties;
  • Transparency: o prospectus must have information relating to guaranteed capital, PPR risk, associated fees and annual management costs.

In other words, when choosing your PPR, reading the prospectus is very important for decision making.

In conclusion, Retirement Savings Plans allow you to save over time to reach retirement age and have a supplement of the amount you will receive from Social Security.

There are two PRP types: the insuranceswhich are managed by insurers and have guaranteed capital, and the fundswhich are managed by investment fund management entities and have no capital guarantee.

Os benefits of having such a plan in your life are, above all, the benefits tax entry and exit, the ease of transfer do PPR e a repayment flexibility of the value without penalties in certain contexts.

Therefore, in order to have these benefits, the choice of PPR must be thought and reflected from now on, taking into account profitability, flexibility and transparency in information.

Are you thinking of setting up a PPR? clarify your doubts no Guide to PPR e talk to our experts that will help you choose the best solution for you.

Also read: PPR Funds: How to save for retirement and beyond

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