Opinion – Marcia Dessen: The little-known face of social security

Open private pension plans were created about 20 years ago in order to offer a product that would allow the accumulation of resources (phase 1) to enjoy supplementary income for future retirement (phase 2).

Considering the low appetite of Brazilians for the insurance market, pension plans were positioned as investment products. Although they can be used to accumulate resources, this is only the first phase of the product. Very little is said about the second phase, that of de-accumulation, when the participant can use the accumulated wealth to buy future monthly income insurance.

It is worth pulling out the membership proposal, or asking the insurer, to retrieve the definitions and choices made: a) the type of plan; b) the taxation regime; c) the fund in which the money will be invested; d) the start date of phase 2; e) the type of benefit; and f) the beneficiaries of the plan upon the death of the holder.

The first phase is very similar to a financial application. The money belongs to the plan’s participant, who can do what they want with it. You can make monthly, sporadic or one-off deposits, depending on your cash availability. And you can redeem part or all of the accumulated money if you don’t intend to use it to pay the premium and purchase monthly income insurance, to be paid after a predetermined date.

During this phase, the participant is free and can do a lot of things: change the originally named beneficiaries; change the start date of the benefit phase; transfer your resources to another insurer through portability; change the type of investment fund in which the money is invested; change the taxation regime from the taxable (progressive table) to the definitive (regressive table). Just can’t change the type of plan.

In the second phase, at the option of the holder, the plan can be converted into an income benefit, through the purchase of monthly income insurance, according to the modalities offered by the insurance company. The accumulated money becomes the responsibility of the insurance company, which assumes the obligation to pay the chosen income: annuity, reversible or not to beneficiaries, annuity with a guaranteed minimum period, or temporary annuity.

The insurer sends a letter 30 days before the departure date, being the last chance to contract or not the income insurance, change the beneficiaries and choose the type of income. Most plans allow you to postpone the departure date, allowing the insured to calmly assess and make a conscious decision.

If no instructions to the contrary are given, the insurer executes the proposal and phase 2 begins. Accumulated capital will no longer be available for redemption, with no room for changes or regrets.

The decision to convert the plan into an income benefit is very important and deserves careful consideration. Those who reach retirement with sufficient wealth and income to support themselves may decide to extend phase 1, keeping the assets in their possession, making redemptions when necessary.

Those with a long life expectancy, scarce income and dependents to protect must carefully study the alternatives and conditions for entering (or not) phase 2.

The insured has an advantage when he lives longer than the life expectancy indicated in the actuarial table used to calculate the monthly income.

The insurer earns when the insured takes out a lifetime income, not reversible to a beneficiary, and dies shortly after purchasing an insurance policy that he/she will not use