It is very likely that someone around you has a retirement savings plan (PPR), but do you know what it is?

The retirement savings plan is a great solution for those who want to have long-term savings or for whom their future old-age pension is already a concern. It is a financial instrument that aims to make your money profitable until retirement age, serving as a complement to it and guaranteeing a more stable financial situation once you decide to finish your work journey.

Logically, the sooner you start investing, the greater the amount accumulated when you retire.

It is important to mention that the PPR can be more than just savings for old age, as it is allowed to redeem the money in advance in certain situations of need. However, there are penalties for early redemption of money, resulting in you not being able to enjoy the tax benefits.

PPRs are managed by insurers or investment fund or pension fund management companies and are usually sold at banks or at the insurance companies themselves.


The different types of Retirement Savings Plan

Retirement Savings Plan Funds

They are managed by investment fund management companies and do not have guaranteed capital. Depending on where the funds are invested, they may have different levels of risk.

PPR funds are similar to securities investment funds, where the assets are made up of shares, bonds and other real estate securities.

Fund management companies invest part of their portfolio in shares. The greater the share component, the greater the risk, but at the same time, the greater the possibility of appreciation.

The withdrawal of the invested amount can be carried out in one go or several times, which makes this type of PPR very flexible when you want to redeem your investment.


Retirement Savings Plan Insurance

They are managed by insurance companies, have guaranteed capital and a minimum return, which offers a low associated risk. The money you intend to invest is handed over to the insurer, all at once or periodically, which applies it to an autonomous fund.

Compared to PPR funds, PPR insurance has lower potential returns and higher maintenance fees. Therefore, it is important to analyze all fees and commissions charged so that their total does not nullify any interest gains.

You can consult the PPR insurances that are available on the market and their respective conditions on the website of the Insurance and Pension Funds Supervision Authority (ASF).

As previously mentioned, although PPR funds do not have guaranteed capital, their return is, in most cases, higher than PPR insurance, and they usually charge lower commissions. However, pay attention to the possible exceptions that may arise, even if the probability is minimal.

Note that, as with PPR funds, money from a PPR insurance can be transferred to another PPR, both in insurance and in trust. However, in this case, a transfer fee may be charged, which cannot exceed 0.5% of the transferred amount.

Retirement Savings Plan Tax Benefits

PPRs offer an attractive and advantageous tax regime in order to attract more subscribers. All these benefits associated with the PPR are described in article 21 of the Tax Benefits Statute, published in Decree-Law no. 215/89.

At the time of Subscription or at “entry”

Regarding the IRS, depending on the age of the person, the tax savings can go up to 400 euros per year. When declaring PPR reinforcements at the IRS, you are entitled to a tax benefit of 20% of the amount invested.

This collection deduction has maximum limits that vary according to the age of the subscriber:

Up to the age of 35 you can deduct up to 400 euros as long as you apply 2000 euros in the PPR that year;

Between 35 and 50 years old, the maximum limit is 350 euros, if applicable, 1750 euros;

From the age of 50, you can deduct up to 300 euros, as long as you apply 1500 euros.

After analyzing this information, it is easy to come to the conclusion that the sooner you invest in a PPR, the more benefits you will obtain and, logically, the greater the long-term savings.


At the time of Redemption or on “exit”

We call redemption the moment of reimbursement of the PPR.
Redemption of the retirement savings plan can be carried out at any time, even if the minimum period of 5 years has not elapsed. However, there may be penalties for early redemption.


PPR redemption in the form of capital

If you choose to redeem the capital, when you withdraw the money you will only pay an 8% tax on the income obtained, instead of the 28% tax applied to most savings products. However, this reduced rate is only valid within the legally established purposes, namely:

Five years after subscription;

If the holder is 60 years of age or older;

In case of old-age retirement;

Payment of mortgage loan installments: regardless of age, if the money is used to pay the mortgage loan installments of the property intended for own and permanent housing, but it does not allow for early amortization.

Remember that if the PPR is a common asset due to the couple’s property regime, both the subscriber and his/her spouse can redeem the PPR money without penalty if the person reaches 60 years of age or obtains the old-age pension .

The lowest tax rate (8%) also applies to refunds made in the following situations:

Long-term unemployment: the subscriber must be registered with the Institute of Employment and Vocational Training for 12 months or more;

Severe disease: When, due to its characteristics, the disease puts the person’s life at risk, requiring prolonged treatment, with the possibility of resulting in significant residual disability;

Permanent disability for work: Permanent disability is considered to exist when there is irreversible damage, such as sequelae or dysfunctions that affect the individual’s ability to work;

Death: In the event of the subscriber’s death, the amount is handed over to the heirs and the beneficiary, if designated. Redemption without penalty also applies in the event of the death of the spouse if the PPR is common property. The part of the value of the plan relating to the deceased is delivered to the participant or the remaining heirs.


If you want to withdraw your PPR at any time without penalty, even if you are not in one of the situations provided for by law, you will have to waive the associated tax benefits. The IRS rate to be applied will depend on the age of your contract at the time of reimbursement:

Up to the fifth year of the contract’s term, the fee is levied on all the income obtained (effective rate of 21.5%);

Between the fifth and eighth year of the contract term, the rate is levied on 80% of the income obtained (effective rate of 17.2%);

After the eighth year of the contract term, the rate is levied on 40% of the income obtained (effective rate of 8.6%).


PPR redemption in the form of income

If the reimbursement is paid in the form of annuities, that is, periodic regular installments, the IRS category H taxation regime is applied. That is, it is treated fiscally as if it were a pension.

Before taking any kind of decision, it is important that you inform yourself and that you are well acquainted with the different characteristics, conditions and possible risks of the retirement savings plans that you have at your disposal.
Being well informed can help you save money and get the most out of your investment.