Find out how you can redeem the PPR without penalties

Find out how you can redeem the PPR without penalties

More and more Portuguese people subscribe to a Retirement Savings Plan (PPR), as a way of add an attractive nest egg up to retirement age. But did you know that you don’t have to wait until then to withdraw your money?

O early redemption of PPR can be carried out at any time. The law provides for a set of exceptions where early repayment is possible without penalty. As, for example, in case of illness, unemployment or mortgage payment.

In this article, we explain how you can redeem the PPR in advance, without penalties, and the methods for repaying the accumulated capital.

What is a PPR?

Before listing the benefits and redemption methods, it is important to first remember what a PPR is.

The Retirement Savings Plan is a financial product that allows make the most of your investment in the long term. As the name implies, this solution was created to act as a complement to the old-age pension, with the aim of guaranteeing a greater financial stability in the reform period.

However, thanks to its advantageous conditions, the PPR is now increasingly used as a medium-term savings. You IRS tax benefits have been attracting the Portuguese, who are starting to bet on this financial product earlier.

However, there are still many people who are unaware of the advantages of this solution. A myth has been created, according to which it is only possible to redeem the money invested in the PPR when you reach retirement age.

However, this statement is not true. It is possible to benefit from higher interest than a term deposit and get the money back whenever you want. However, it must take into account the product contract.

For that, you need to carefully evaluate and read the contractual conditions of each PPRwithout forgetting to consider the commissions and penalties that may exist.

Also read: Guide on PPR: No more doubts about Retirement Savings Plans

What kind of savings plans are there?

Although it is the best known, PPR is not the only savings plan available on the market. They exist other options for medium or long term savings which can also be used to finance the education of the holder or a member of the household.

So, currently, there are three types of savings plans:

  • retirement savings plans (PPR), associated with a retirement savings fund;
  • education savings plans (PPE), associated with an education savings fund;
  • and retirement/education savings plans (PPR/E), associated with a retirement/education savings fund.

In addition to the plans, there are also savings funds, which can take the following forms:

  • securities investment funds, ie funds invested in securities (shares, bonds, equity securities, etc.);
  • pension funds, which finance one or more pension or health benefit plans;
  • and life insurance, that is, an insurance contract carried out on the life of one or more people, which guarantees, as the main coverage, the risk of death, survival or both.

Savings plans and funds can be a alternative to traditional investment products, such as deposits or guaranteed capital products, which are showing lower returns. Within this long-term savings solution, the PPR remains the most popular plan for the Portuguese.

Also read: Types of PPR: what are the differences and advantages for your future?

What are the PPR tax benefits?

More than a retirement complement, the PPR is also used as a medium-term savings plan. In addition to monetizing the amount initially invested, you can also enjoy a set of tax benefits ine IRS.

But then what are the advantages of PPR?

Subscription tax benefit

The PPR “entry” advantage allows tax savings of up to €400 per year, depending on the age of the holder.

By declaring the PPR reinforcements to the IRS, you benefit from a deduction of 20% of the amount invested. However, the maximum amount of the deduction varies depending on the age of the savings plan subscriber:

  • under 35 you can deduct up to €400 per year, provided you invest €2,000 in PPR that year;
  • between 35 and 50 years old, you can deduct up to €350, provided you apply €1,750;
  • and from the age of 50, you can deduct up to €300, as long as you invest €1,500.

Therefore, the sooner you invest in a PPR, the greater the benefit. In addition to enjoying the tax benefits in terms of the IRS, the investment time will be longer, allowing you to benefit from the exponential effect of compound interest.

Tax benefit on redemption

But tax benefits aren’t just limited to annual tax deductions. Also “on the way out” you can benefit from the advantages of PPR.

In this case, the tax benefit granted on redemption consists of a lower IRS rate about income. But this rate varies according to the way in which the reimbursement is made (in capital or in rents).

For refunds made in the situations provided for by law, the rate applied is only 8%, much lower than the 28% tax applied to interest earned on most savings products. However, to take advantage of this reduced rate, the redemption will have to comply with the legal conditions, which we present below.

Read also: PPR and tax benefits

How can I redeem the PPR without penalties?

The retirement savings plan can be redeemed, in whole or in part, before retirement age. In some cases, there may be penalties for early redemption. However, certain situations are covered by the exemption from the penalty.

The easiest way to use PPR as a cash-back savings solution at any time is to not take tax deductions. That is, when submitting the IRS statement, delete the fields related to the PPR. If not, mobilize the money in advance, outside the exceptional conditionsyou will have to pay back the amounts deducted in previous years, plus 10% for each year.

Although this is the simplest option, you are not enjoying all the tax benefits of the PPR. Thus, it is essential to know the exception cases in which this savings plan can be redeemed without penalties:

  • retirement due to old age or from the age of 60 of the insured person;
  • serious illness, which may endanger the life of the holder, which requires prolonged treatment or causes significant residual disability;
  • permanent incapacity for work. Applicable to holders of disability pension or pension for accidents at work or occupational disease (provided that the disability exceeds 60%), or who are permanently disabled and prevented from receiving more than one third of the remuneration corresponding to the normal exercise of their profession;
  • long-term unemployment. In this case, it applies to the unemployed, available for work, registered at the job center for more than 12 months;
  • payment of installments of credit agreements secured by mortgage on real estate intended for the insured person’s own and permanent housing. This includes credit agreements for the acquisition, construction and execution of ordinary and extraordinary maintenance works and for the improvement of own and permanent housing; credit agreements for the acquisition of land for the construction of own and permanent housing; and other contracts guaranteed by mortgages on properties intended for own and permanent housing. The reimbursement amount can only be allocated to the payment of overdue installments (including principal, remuneration and arrears interest, commissions and other credit-related expenses) and the payment of installments due.

Check exceptional cases

To prove these exceptional cases, simply present:

  • citizen card to verify age;
  • certificate or authenticated declaration of the pensioner’s veracity issued by the Social Protection Institution that assigns the retirement, in the case of retirement due to old age;
  • medical certificate issued by the Health System services covering the insured person, describing the serious illness in detail, in the case of serious illness;
  • authenticated declaration of the veracity of a pensioner with the degree of incapacity, issued by the entity that grants the pension, in the case of permanent incapacity for work;
  • certificate of registration at the Job Center for at least 12 months, in the case of long-term unemployment.

Under these legal conditions the insured person’s spouse may also be coveredin particular long-term unemployment, permanent incapacity for work and illness.

In cases of retirement due to old age, age over 60 and payment of the housing loan, reimbursement is possible. for deliveries that are at least five years old or the entirety, five years after the first delivery, if the amount of deliveries made in the first half of the contract term represents at least 35% of all deliveries.

Even if you do not fulfill any of these legal conditions, You can withdraw the PPR value at any time. However, you will have to pay the tax penalties provided for by law and the contractual ones.

Contracts are dependent on each banking institution and, as a rule, are only valid for the first five years of the contract. Taxes are related to tax benefits received. In these cases, you will have to return the tax benefit to the State plus a penalty of 10% for each year that has elapsed.

What are the refund modalities?

After knowing the legal conditions to redeem the PPR, it is also important to know how you can receive the capital. Two options are available:

  • in capital, that is, receive everything at once when you want;
  • in monthly rents or installments. In this case, you can receive a monthly supplement after your retirement date for 10, 20 or 30 years, or up to 100 years of age.

A repayment option and the indicative date for retirement, chosen by the holder when joining the PPR, can be changed. To do so, you must submit the request at the bank’s branch up to 45 days before the transfer of the amount, whether total or partial.

As we indicated earlier, if you withdraw the entire capital, within the legal conditions, you only have to pay a 8% tax on the income obtained. A much more attractive value than the 28% tax levied on most savings products.

On the other hand, if the reimbursement is paid in the form of rents, the same pension taxation systemwhich corresponds to income from IRS category H.

In the event of the death of the insured person, the value of the plan is transferred to the heirs or, if designated, to the beneficiary. If the PPR is the common good of a couple, in the event of the death of the holder’s spouse, the capital relating to the deceased person is delivered to the participant or to the remaining heirs.

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

Factors to consider before choosing a PPR

In short, don’t be misled by the name. PPRs do not only serve as supplements to the old-age pension, nor are they specific to who is closer to retirement age.

The tax benefits associated with PPRs are an incentive for those who are thinking of saving, and not just for retirement. But before subscribing to a savings plan you must carefully analyze the conditions.

Compare the PPRs of different banks and check the conditions under which you can redeem and possible penalties. Knowing this information can help you save a lot of money.

Also read: Should I do a PPR?

Hang tags
  • #investments,
  • #savings,
  • #PPR

Finanças pessoais,Investimentos,Poupança,investimentos,poupança,PPR
#Find #redeem #PPR #penalties

Leave a Comment

Your email address will not be published. Required fields are marked *