Six benefits of investing in pension plans
Posted: Thu Dec 12, 2024 3:13 am
Pension plans are instruments designed to save for retirement. Their special characteristics have made them a type of product widely used by investors. They serve as an alternative to other similar savings instruments , such as investment funds . Below, we explain the benefits of investing in pension plans.
Table of Contents
What are the six benefits of investing in a pension plan?
Saving for your retirement
Tax benefits
It adapts to your profile and investment style
They are not seizable
They can't break
They are flexible investment instruments
Invest in Pension Plans and you will discover the benefits of investing with inbestMe
What are the six benefits of investing in a pension plan?
Below, we will show you the six main benefits of investing in a pension plan:
Saving for your retirement
The first of all the benefits of investing in pension plans is that they are completely illiquid products. So much so that their conversion into liquid money is regulated by law.
Specifically, it is only possible to withdraw the capital when you retire or under very restrictive conditions , such as permanent disability, eviction, long-term unemployment or ten years after the first contribution.
This, which for many may be a problem, can be seen as an advantage for those investors who are looking to save for retirement . In addition, they are impatient enough to be able to keep their capital in more liquid products, such as investment funds .
Tax benefits
Pension plans enjoy a series of tax advantages that are non-existent in other products.
To begin with, and perhaps most importantly, all contributions to this instrument are deductible from personal income tax, with a limit of 2,000 euros per year (in 2021), which may be increased by up to an additional 8,000 euros for contributions from the employer on behalf of the employee to corporate social security instruments (employment pension plans - PPE and corporate social security plans - PPSE).
Furthermore, the transfer of vested rights between two female database pension plans is exempt from taxation, as is the case with investment funds.
Download Pension Plans Guide
It adapts to your profile and investment style
There are different pension plans that suit the investment profile of each participant : fixed income, variable income, mixed or guaranteed, depending on the risk that each person wants to assume.
In addition, pension plans invest in a variety of assets of different types, geographic areas and sectors of activity. In addition, in recent years new possibilities have appeared, such as indexed pension plans , which replicate some of the most important stock market indices in the world.
They are not seizable
As a general rule, pension plans cannot be subject to seizure, as established in article 50.3 of Law 35/2006, of November 28, on Personal Income Tax .
However, this benefit is only enjoyed while the plan is invested and the contingency it covers does not occur: retirement, disability, etc.
It is understood that the vested rights of a pension plan do not form part of the participant's assets and, consequently, do not have to pay taxes either in the Gift and Inheritance Tax or in the Wealth Tax.
Obviously, the redemption and the subsequent conversion into cash increases the participant's capital and, consequently, it would become part of his or her assets.
They can't break
Pension plans are supervised by the Directorate General of Insurance and Pension Plans (DGSPP), which, among other things, establishes the rules by which they must be governed.
Specifically, pension plans cannot become insolvent, since their level of indebtedness is limited. If a management entity were to go bankrupt, nothing would happen to the saver's money , since he would continue to be the owner of the capital through the assets acquired by the plan.
Of course, just because they can't go bankrupt doesn't mean your money is safe .
Depending on your risk profile as an investor, you may lose part or all of your capital if it is invested in assets that go bankrupt or see their value drop significantly. And, in this case, there will be no public fund behind you to support your assets.
They are flexible investment instruments
You decide when, how and how much money you want to invest, up to the limit we mentioned of 2,000 euros per year (in 2021). In addition, you can increase your contributions, reduce them or eliminate them at any time, according to your needs and preferences.
In other words, the contributions you make to your pension plan are adapted to your income and lifestyle. This way, you can adjust them at any time according to your needs.
Invest in Pension Plans and you will discover the benefits of investing with inbestMe
Do you want to open your own pension plan, but don't know where to start?
With inbestMe , you will have a portfolio of pension plans instead of a single pension plan.
inbestMe will keep the portfolio adjusted to your investor profile. If your personal situation changes, we will modify the plan profile ourselves, so that you do not have to look for another fund that fits your new situation.
In short, a plan for life.
Table of Contents
What are the six benefits of investing in a pension plan?
Saving for your retirement
Tax benefits
It adapts to your profile and investment style
They are not seizable
They can't break
They are flexible investment instruments
Invest in Pension Plans and you will discover the benefits of investing with inbestMe
What are the six benefits of investing in a pension plan?
Below, we will show you the six main benefits of investing in a pension plan:
Saving for your retirement
The first of all the benefits of investing in pension plans is that they are completely illiquid products. So much so that their conversion into liquid money is regulated by law.
Specifically, it is only possible to withdraw the capital when you retire or under very restrictive conditions , such as permanent disability, eviction, long-term unemployment or ten years after the first contribution.
This, which for many may be a problem, can be seen as an advantage for those investors who are looking to save for retirement . In addition, they are impatient enough to be able to keep their capital in more liquid products, such as investment funds .
Tax benefits
Pension plans enjoy a series of tax advantages that are non-existent in other products.
To begin with, and perhaps most importantly, all contributions to this instrument are deductible from personal income tax, with a limit of 2,000 euros per year (in 2021), which may be increased by up to an additional 8,000 euros for contributions from the employer on behalf of the employee to corporate social security instruments (employment pension plans - PPE and corporate social security plans - PPSE).
Furthermore, the transfer of vested rights between two female database pension plans is exempt from taxation, as is the case with investment funds.
Download Pension Plans Guide
It adapts to your profile and investment style
There are different pension plans that suit the investment profile of each participant : fixed income, variable income, mixed or guaranteed, depending on the risk that each person wants to assume.
In addition, pension plans invest in a variety of assets of different types, geographic areas and sectors of activity. In addition, in recent years new possibilities have appeared, such as indexed pension plans , which replicate some of the most important stock market indices in the world.
They are not seizable
As a general rule, pension plans cannot be subject to seizure, as established in article 50.3 of Law 35/2006, of November 28, on Personal Income Tax .
However, this benefit is only enjoyed while the plan is invested and the contingency it covers does not occur: retirement, disability, etc.
It is understood that the vested rights of a pension plan do not form part of the participant's assets and, consequently, do not have to pay taxes either in the Gift and Inheritance Tax or in the Wealth Tax.
Obviously, the redemption and the subsequent conversion into cash increases the participant's capital and, consequently, it would become part of his or her assets.
They can't break
Pension plans are supervised by the Directorate General of Insurance and Pension Plans (DGSPP), which, among other things, establishes the rules by which they must be governed.
Specifically, pension plans cannot become insolvent, since their level of indebtedness is limited. If a management entity were to go bankrupt, nothing would happen to the saver's money , since he would continue to be the owner of the capital through the assets acquired by the plan.
Of course, just because they can't go bankrupt doesn't mean your money is safe .
Depending on your risk profile as an investor, you may lose part or all of your capital if it is invested in assets that go bankrupt or see their value drop significantly. And, in this case, there will be no public fund behind you to support your assets.
They are flexible investment instruments
You decide when, how and how much money you want to invest, up to the limit we mentioned of 2,000 euros per year (in 2021). In addition, you can increase your contributions, reduce them or eliminate them at any time, according to your needs and preferences.
In other words, the contributions you make to your pension plan are adapted to your income and lifestyle. This way, you can adjust them at any time according to your needs.
Invest in Pension Plans and you will discover the benefits of investing with inbestMe
Do you want to open your own pension plan, but don't know where to start?
With inbestMe , you will have a portfolio of pension plans instead of a single pension plan.
inbestMe will keep the portfolio adjusted to your investor profile. If your personal situation changes, we will modify the plan profile ourselves, so that you do not have to look for another fund that fits your new situation.
In short, a plan for life.