A Pension Savings Plan (PPR) is a form of investment that entails a number of tax advantages. In addition, mutual fund PPRs have the potential to outperform other traditional savings products, including insurance PPRs, given more than a decade of low interest rates and market correction of liabilities. Because they usually do not have guaranteed capital, PPR funds offer managers greater flexibility in seeking investment opportunities that can generate higher returns. The normality of interest rates will give these products, which invest mainly in equities and bonds, extra profit potential.
When subscribing to a PPR fund, the investor acquires units of participation (UP) of that fund at a certain price, with the expectation that it will increase over time. A PPR fund is daily quoted, which means that the investor can monitor its value closely and “sell” its holdings at any time, subject to its current quote. However, in order to fully enjoy the tax benefit and not have to pay a penalty, you must redeem your PPR under one of the conditions laid down by law, namely: old-age pension, older than 60 years, in the event of serious illness or permanent incapacity for work of the participant or one of his housemates, death, long-term unemployment of the participant or one of the members of your household, payment of home loan installments or other exceptional cases provided for by law on temporary base.
Tax Benefits of PPR in IRS
Retirement savings plans offer a range of unparalleled benefits compared to other investment products. When subscribing to a PPR, there is an IRS tax benefit of 20% of the investment from the outset, which can amount to 400 euros per year, depending on the age of the taxpayer and the amount invested.
How to get the PPR tax break
When filing the IRS return related to the year in which you made your investment in the PPR, the pre-populated amount should automatically appear in Appendix H under the “Debit Deductions” section. This way you can enjoy this tax benefit in a simple and effortless way. This value can be manually adjusted if desired, for example if you have made several PPRs and/or can redeem your PPR at any time without having to return the tax credit received.
To access this benefit every year, you must strengthen your PPR annually. Maintaining a saving habit, in addition to the immediate benefits, can build significant financial wealth over the years. Do not believe?
Retirement Savings Plan Simulator
With an annual savings and investment routine in a Retirement Savings Plan, you can build up much more than you can imagine. But nothing beats calculating and realizing in Optimize’s PPR Simulator, how much you can earn at retirement age and what the estimated profit is in terms of tax benefits and profitability.
By performing some simulations, it can be concluded that the age at which you start investing in PPR determines the amount you can earn. Not only because the younger you are, the more years you have to invest and benefit from the returns, but also because the tax advantages are higher. But even if you are no longer in the age group with the highest tax benefit, the income and benefits of PPR are quite attractive, especially when compared to other investment alternatives.
The capital gains tax is another great advantage of these products, it can be as little as 8% instead of the usual 28% of other investment products, which will have a significant impact when you want to pay back your investment.
What is the best PPR in Portugal?
Once the decision to invest in a PV has been made, the next question is how to discover the best option among the wide range of solutions currently being marketed in Portugal.
To find the most suitable PPR for each investor, several factors must be taken into account. One of the advantages of PPR in the form of a fund is the fact that it is possible to find solutions with different levels of risk that make it possible to adapt to any investor profile.
The maximum share of shares in a PPR is initially associated with potential profitability. A PPR with a higher proportion of equities against bonds will therefore generally yield a higher average long-term return than a PPR with a smaller proportion of equities. As with all investments, the expected return is directly related to risk/volatility. In order to have greater profitability, the risk level of the associated portfolio will generally be higher.
When analyzing returns across all risk profiles, according to the Portuguese Association of Investment Funds, Pensions and Heritage (APFIPP), Optimize PPR Aggressive was the most profitable last year, ending the year at 18.26% of appreciation. This PPR is managed by Optimize Investment Partners, a Portuguese manager that is becoming increasingly popular in Portugal due to the returns achieved and various awards from national and international institutions.
Secure the next tax benefit
As we can see, investing in PPR has several advantages that are unparalleled in financial investments, which you should take advantage of as soon as possible. Don’t wait until the last days of the year, register or strengthen your PPR and guarantee up to 400 euros in the next IRS now.
 The legal conditions provided for, which can be consulted in more detail in Decree-Law No. 158/2002, legal regime of the PPR, of old-age retirement from 60 years and use for the payment of mortgage loans for owner-occupied real estate, assume that 5 years have passed since the subscription date.
 The Optimize PPR Agressivo fund was the most profitable in terms of risk level in Portugal in 2021, according to data released by APFIPP with a reference date of 12/31/2021. Profitability disclosed represents past data and is not a guarantee of future profitability. The value of the units may increase or decrease depending on the risk level, which varies between 1 (minimum risk) and 7 (maximum risk). The funds managed by Optimize are securities investment funds, whose full prospectuses and IFI are available from the marketing entities. Said returns are exclusive of management and deposit costs, audit costs and supervision costs. The amounts disclosed are implicitly subject to tax payable by the collective investment undertaking and the investor is responsible for paying any taxes on capital gains. Investing in the collective investment undertaking may entail the loss of the invested capital. The published annualized profitability measures, calculated on the basis of a period of more than one year, would only be obtained if the investment was made over the entire reference period.