The end of the year is approaching and many people with money left are rushing to make investments in private pension with an eye not only on long-term investment, but also on the advantages of reducing taxation on the Income Tax in 2025. The deadline for making contributions to the PGBL (Free Benefit Generating Plan) this year ends in December 30th.
The PGBL deduction limit corresponds to 12% of annual taxable gross income. Any amount contributed beyond this percentage will not be considered for deduction purposes. So, is it worth investing this money now to reduce taxes?
“It is advantageous for those who file a full Income Tax declaration and have taxable income”, explains Sidney Lima, analyst at Ouro Preto Investimentos. “By opting for a PGBL now, the investor can take advantage of both the immediate tax advantage and an attractive profitability scenario in a high Selic scenario.”
The PGBL and VGBL (Vida Gerador de Benefício Livre) are private pension plans with accumulation characteristics. In both, income tax (IR) is levied on the redemption or receipt of income, but the tax treatment is different between VGBL and PGBL.
In VGBL, IR is only levied on investment income; in PGBL, on the total amount redeemed or received in the form of income.
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Tax efficiency
The main advantage of investing now in PGBL is tax efficiency. “The most relevant is the impact on the IRPF declaration in 2025, where it is possible to deduct up to 12% of annual taxable income. With this, the investor will be able to reduce the tax calculation base, generating savings on payment or increasing the refund value”, explains Lima.
Another point is that the PGBL allows the tax on the amount invested to be postponed until the moment of redemption, providing the investor with more capital to make a profit over time.
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Jarbas Thaunahy Santos de Almeida, finance professor at Strong Business School, explains that, before making the contribution, it is necessary to do the math. Anyone who has already invested part of their taxable income in the PGBL this year must calculate how much is needed to reach 12% of the total value.
“Anyone who has R$100,000 in taxable income in 2024 can contribute up to R$12,000 to stay within the deductible contribution limit”, highlights Thaunahy. “If you have already invested R$7,000 per year, for example, you can now invest a maximum of R$5,000 more. The advantage of this is that, instead of paying a tax on the amount of R$100,000 in the Revenue adjustment, the bill drops to R$88,000.”
PGBL and INSS
Attention: to be able to deduct contributions to the PGBL, it is necessary to contribute to Social Security through the INSS (National Social Security Institute). “Without this contribution, the deduction is not valid”, highlights Gianluca Di Mattina, investment specialist at Hike Capital.
The deduction is also valid for those who contribute to another social security scheme, such as public servants, for example. Retirees can also take advantage of this benefit.
Not tax exemption
However, anyone who thinks that doing this maneuver will guarantee tax exemption is mistaken. The money you stop paying to the IRS now will be paid when the private pension balance is redeemed. The contribution, then, should be seen as a long-term opportunity.
“It is very important for investors to know that this tax will be paid up front”, reinforces Carlos Castro, coordinator of the Associate Relations Committee at Planejar, an entity that certifies financial planners. “A hypothetical example: see the case of a person who saved R$1,000 and saved the amount in social security. In 10 years, if she invested what she saved, it will be advantageous. Otherwise it isn’t.”
It is essential that investment in PGBL is aligned with the investor’s financial planning, highlights analyst Sidney Lima, from Ouro Preto Investimentos. “Decisions based solely on tax benefits can compromise the long-term strategy, if they are not mainly compatible with the investor’s risk profile”, says Lima.
VGBL x PGBL
According to Fenaprevi (National Federation of Private Pensions and Life), VGBL represents 63% of plans sold (8.9 million); PGBL has a 22% share (3.1 million plans); and the remaining 15% (2.2 million) come from traditional plans.
VGBL was responsible for 92% of total funding between January and August this year (around R$120 billion). More than R$8 billion was contributed to the PGBL plans, a level ahead of the approximately R$2 billion raised in traditional open private pension funds.
When filing the 2025 Income Tax declaration, the taxpayer will have to fill in the amount invested in private pension in the “Payments Made” section of the Federal Revenue program, using the code “36 — Supplementary Pension.
