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Opinion – From Grain to Grain: What to do if you applied in PGBL and should have been in VGBL?


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There are a multitude of acronyms in the financial market and confusion with a single letter can cause great damage. This occurs in the case of having applied in PGBL, while expected to be in VGBL. I explain what you should do when you apply the wrong pension product.

There are three possible errors to occur when applying for pensions.

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In two of them, the damage tends to be minimal, but in the third, the damage can be great if you do the wrong thing.

I explain the two least critical cases first.

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If you applied for the right type of pension, but chose the wrong fund, no problem. Just request a portability and everything will be resolved in no time.

It is not possible to port from VGBL to PGBL and vice versa. Therefore, these cases raise more doubts. Let’s start with the simplest.

The simplest case occurs if you applied to a VGBL, whereas you should have applied to a PGBL. In this case, the best thing to do is to request the ransom as soon as possible.

So, don’t worry about the IR rate being too high at first. Income tax is only levied on income. As you kept the product for a short time, you will pay almost nothing in IR. So it’s not worth the wait.

The same does not occur if it was applied in PGBL and should have been in VGBL. This is the critical case. Don’t make a hasty decision to redeem.

Income tax in the case of PGBL is on principal and income. Therefore, if you redeem, you can lose up to 35% of everything you invested.

The ideal is to keep this PGBL for as long as you can, but not make any further contributions to it.

If you redeem, you may only keep 65% of what you invested, but if you keep, you will earn returns on the IR you would have paid.

After 10 years, the rate drops to 10% and in the long term, the largest portion of the portfolio will be return. That is, that initial amount you applied will be a fraction of the total.

For example, if you invested R$10,000 in PGBL and keep investing in an investment that yields 10% per year, in 10 years, you will have R$25,937.4. If you redeem at this time, you will pay R$ 2,937.4.

In the same example, if you invested BRL 10,000 in PGBL and redeemed it a few days after discovering that you made a mistake, you will pay an IR of up to BRL 3,500.00.

Even if you invest what is left over, that is, R$6,500, in the same investment that yields 10% per year for 10 years, you will only have R$16,859.33 at the end of the period.

So clearly it’s worth the wait in this case.

The ideal is to pay attention before applying, but if you made a mistake, don’t despair, just follow the rule above.

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

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