Table of Contents
Because it is a product designed to save for your retirement
For its attractive taxation
For its flexibility
For your safety, security and supervision
For its transparency
For its low costs
Because it is a product designed to save for your retirement
This is possibly the main reason for investing in a pension plan. The consolidated rights of the plan (i.e. the contributions and the profitability of the product) can only be redeemed in chinese overseas america database very restrictive cases, among which retirement stands out. There are also other exceptional situations that allow the plan to be redeemed, such as serious illness, long-term unemployment, eviction or after 10 years from the first contribution.
It is therefore a completely illiquid product that avoids the temptation to withdraw capital prematurely. This is an advantage for the most impatient investors, who seek high returns in short periods of time, and allows them to take advantage of all the benefits of long-term investment .
For its attractive taxation
Pension plans have a different tax treatment than other financial products. However, in recent years, they have lost part of their appeal due to the reduction of the maximum limits that give the right to deductions in the personal income tax base.
Specifically, in 2022, the maximum limit for contributions to individual pension plans has been reduced to 1,500 euros (it should be remembered that just two years ago, this limit was 8,000 euros, having been reduced to 2,000 euros in 2021). This amount is capped at 30% of the net income from the worker's work and economic activities. This is an interesting point in the income tax return.
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For its flexibility
You will be the one who decides how much and when you contribute money to invest in the pension plan. You can schedule monthly contributions, do it manually or all at once, as long as they do not exceed the maximum amount established by law.
In addition, you can transfer part or all of the vested rights from one plan to another without any tax burden, a particularly interesting alternative if you want to change from a higher-risk plan to a lower-risk one. This possibility also exists in investment funds, but not in other investment products.
For your safety, security and supervision
Pension fund investments are held by depository or management entities. And although it is very unlikely that these entities will go bankrupt, you should not worry in any case, since your situation as a participant would not be affected and it would simply be enough to replace the entity.
This doesn't mean that you, as an investor, can't lose money. Depending on the risk you take, there will be certain times when your returns fall or even become negative. However, this risk is reduced if you invest for the long term.
Furthermore, pension plans are not unsupervised instruments. On the contrary, they are guaranteed and supervised by the Directorate General of Insurance and Pension Funds (DGSFP).
For its transparency
When you take out a pension plan, you will feel informed at all times, both before and after taking it out. Entities are obliged to periodically publish all information about the pension plan, about the evolution and situation of the plan, and all the details of contracting the fund to potential clients.
This way, you will be investing in a completely transparent product without any tricks.
For its low costs
The maximum costs that management entities can charge for their products are limited by Royal Legislative Decree 1/2002 , of 29 November, which approves the revised text of the Law on Regulation of Pension Plans and Funds. Specifically, the maximum commission is 0.20% for the depositary commission and an average of 1.25% for management. However, they are determined according to the type of product:
For fixed-income pension plans, the maximum commission is 0.85%.
In the case of mixed-income plans, the maximum commission is 1.30%.
If the plan is variable income, the maximum commission will be 1.50%.
In addition, increased competition between financial institutions and the consolidation of indexed plans has meant that, in practice, the product's fees have been reduced even further. At InbestMe you can open your pension plan from €250, with a management fee of 0.60%. With high diversification and high profitability so that you only have to enjoy your retirement.