The open private pension market in Brazil already accumulates, in 2024, positive balance of R$47.7 billion. This level should increase because the available data on the sector goes until the 3rd quarter of the year (September). Therefore, the performance of the 4th quarter (October to December) remains, which will only be known in 2025.
According to Fenaprevi (National Federation of Private Pensions and Life), just over 11.2 million people have some private pension plan in Brazil, equivalent to 5.3% of the population.
Among the factors that justify the good moment of the sector are the changes to tax rules for exclusive fundswhich boosted the migration of investors to private pensions.
Exclusive funds get their name because they are closed and have only one shareholder, unlike traditional funds, which are open to several shareholders. This modality, which provides a much more personalized portfolio, is aimed at investors with high net worth.
At the end of 2023, Congress approved changes in the taxation of exclusive and offshore funds. Exclusive short-term funds now have a rate of 20% and long-term funds, 15% — the same rate for funds abroad.
Before the change, high-income funds, both abroad and in Brazil, were only taxed when holders withdrew their profits, the so-called “redemption”, which could take years to happen. With the measure approved in Congress, the Exclusive funds are now taxed semi-annuallyin the system called “come-quotas”, and offshore ones, once a year.
“The migration of resources from exclusive funds to private pensions occurred because exclusive funds lost part of their attractiveness due to more frequent taxation and less competitive rates. Pension plans offer advantages such as Income Tax and reduced rates in the long term (which can reach 10% in regressive regimes)”, explains Marina Prieto, coordinator of the Accounting Sciences course at Strong Bunisses School.
Flexibility in contributions and redemptions in private pensions also attracts investors looking for greater liquidity and simplified succession planning, reinforces Prieto.
With the offer of more competitive products, managers have made strong use of digital platforms to expand access to plans. And one audience is standing out: the younger investor, highlights Ângelo Belitardo, manager of Hike Capital.
Private pension on the rise
Recent report from InvestNews showed, from different market databases, that, By 2050, the official pension “seesaw” (INSS) will turnwith the presence of more beneficiaries than contributors, which should make the government system more saturated and lead more people to private pensions.
For Carlos Eduardo Gondim, statutory director of Fenaprevi, Brazilians today are more attentive to financial planning “designed for the future”.
Other figures confirm the Fenaprevi director’s observation: net inflow from open private pensions registered, from January to September this year, high of 64.6% compared to the same period last year. And ransoms increased little, 3,4%a sign that, in 2024, the vast majority of investors made contributions to private pension plans and left their money there. A very different situation from that recorded during the Covid-19 pandemic, when redemptions reached an all-time high.
Private pension performance
Gross capture
- Jan-Set/2023: R$125 billion
- Jan-Set/2024: R$ 146.9 billion
- Growth: 17,6%
Net capture
- Jan-Set/2023: R$29 billion
- Jan-Set/2024: R$47.7 billion
- Growth: 64,6%
Rescues
- Jan-Set/2023: R$99.3 billion
- Jan-Set/2024: R$ 96.0 billion
- Growth: 3,4%
Understand private pension
Private pension investment funds are ways of saving to supplement official retirement or to achieve long-term goals, such as paying for your children’s college education. They can be open or closed plans.
Open plans are offered by financial institutions, such as banks and insurance companies, and are available to anyone interested. They are flexible and allow workers to choose between different investment options, according to their risk profile and financial objective.
Some examples of open plans These are the Free Benefit Generating Plan (PGBL) and the Free Benefit Generating Life (VGBL). These plans are ideal for those looking for an additional way to save for retirement, with the advantage of being able to be contracted and managed individually.
There are also closed plans, offered by the company only to its employees through a foundation.
What to expect for 2025?
According to the experts consulted, private pensions should be favored in 2025 by more tax incentives, such as tax adjustments, and regulatory changes — effective ways to free the sector from bureaucracy and attract new investors.
For Marina Prieto, coordinator of the Accounting Sciences course at Strong Bunisses School, the digitalization and personalization of portfolios accompanied by the increase in financial education in the country, will also help to “expand the understanding of the benefits of private pensions, further increasing the base of investors”.
