Opinion – Grain in Grain: Find out how much pension you should have in your wallet

Last Sunday, I wrote in this column that individuals who complete the declaration and receive taxed income should enjoy the benefits of applying for PGBL-type products. I received some messages asking if those who do not fit this condition should apply in VGBL and how much would be recommended to have in application of this type.

As I mentioned, pension products have special advantages, but VGBLs also have advantages.

We can list at least three advantages: the inexistence of “come quotas”, the possibility of the income tax rate falling by up to 10% in ten years of application and, the main advantage, the simplification of patrimonial succession.

VGBL-type products are excellent vehicles for planning a smoother and lower-cost estate succession.

The succession advantage, which exists in the PGBL and VGBL products, is precisely the one that can explain what value you should have in private pension.

It is important to understand that VGBLs are not short and medium term investment vehicles. Fiscally, they are not advantageous for this purpose, when the regressive or definitive tax regime is chosen.

So, yes, it is advantageous to have VGBL applications with a succession objective. However, the proportion of how much to apply is not as clear as it is in the case of PGBL.

How much you should invest in PGBL is easily determined by the tax benefit, that is, you should invest up to 12% of your taxed income. However, how much equity should you have in VGBL-type applications?

There is a general rule for you to know how much at least you should have in private pension. I remind you that this amount in private pension should include both PGBL and VGBLs.

You should have a pension for the purpose of succession at least the percentage equivalent to your age on the resources that you do not intend to spend in the next 10 years.

For example, consider a 40-year-old investor, with investments totaling BRL 200,000 and who intends to make a down payment on a property in the next few years, using the entire amount saved as a down payment. It shouldn’t apply in VGBL.

He could even have PGBL, as he used it to take advantage of its benefits. But, it shouldn’t apply additionally in VGBL.

However, consider the case of a 70-year-old individual who has R$1 million and expects to use only R$600,000 in the next 10 years for his personal income. It would make sense for this individual to have at least BRL 280,000 (= 70% * BRL 400,000) invested in VGBL (or PGBL) type products.

Assume the example of a young man who is only 30 years old, who has R$50 and does not intend to use the resources in the next 10 years. This applicator could have BRL 15 thousand (= 30% * BRL 50 thousand) in VGBL-type products.

Therefore, even for those who do not use private pensions to deduct the IR, it is recommended to have applications in VGBL.

However, this application must consider the long-term horizon, that is, 10 years, and its proportion in the portfolio can be regulated for the purpose of succession using the age rule mentioned above.

It is important to understand that every rule of thumb seeks to help the investor in general, but it is recommended that each case be studied, considering the particularities of each investor.

Michael Viriato is an investment advisor and founding partner of Investor’s House

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