As private pension is a long-term investment, it is often suggested that this portion should be in assets with a long-term horizon, for example, stocks. However, this strategy may not be the best in fiscal terms.
Many investors consider private pensions, that is, PGBL and VGBL segregated from investments, as if they were a different asset class. This is not the best attitude.
Private pension is a vehicle for accumulating resources equivalent to investment funds. Your pension fund can be invested in fixed income, multimarkets and stocks.
In this sense, the portion allocated to private pension plans must be considered in the distribution of its total investment portfolio.
For example, imagine that you have a distribution similar to the average allocation of Brazilian investors to funds. Considering Anbima’s data on investment funds, this distribution is shown in the pie chart below.
On average, Brazilian investment fund investors have 60% of their portfolio in fixed income, 30% in hedges and 10% in shares.
Usually, it is said that pensions should be allocated to stock vehicles, as both have a long-term profile.
However, the investment horizon should not be the only criterion for deciding on the distribution of investments.
The tax gain is something even more relevant when thinking about the long term.
Unlike equity funds, fixed income and multimarket funds have the semi-annual advance of income tax, called “come quotas”.
Thus, the most appropriate thing is to allocate your private pension in fixed income or multimarket funds.
The share of shares can be allocated through investment funds, as they no longer have shares.
In this way, a greater portion of your portfolio will be exempt from the semi-annual income tax.
For example, if you have BRL 100,000 in financial investments and your private pension is BRL 30,000, the most appropriate thing is for the pension plan to correspond to the multimarket funds in your portfolio.
In this way, its portfolio would have a distribution of 60% in fixed income funds, 30% in multimarket pension funds and 10% in equity funds.
By avoiding the anticipation of IR, you earn income on this tax that would be paid.
In 30 years, the profitability of an application that does not have quotas can be 50% higher than one that has an advance of semi-annual income tax. This difference can be seen in the graph above.
Therefore, if you distribute your pension in fixed income or multimarket, you improve the gain of your total portfolio in the long term.
Michael Viriato is an investment advisor and founding partner of Investor’s House
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