Retirement Plan Funds
Retirement Plan Funds offer long term fiscal benefits, while allowing for estate planning. The Funds are supervised by the Ministry of Finance, through the "Superintendência de Seguros Privados - Susep" (Superintendence of Private Insurance).
There are different Retirement Plan Funds aimed at different risk profiles. Investors are free to relocate their holdings among different Retirement Plan funds, at any time, without taxation, at no transaction fees or penalties.
The contribution values are not fixed and may be changed at the investor’s discretion.
Types of Plans
There are two basic types of pension plans:
PGBL - Plano Gerador de Benefícios Livre
PGBL plans are recommended for investors who have taxable income, since it allows for a deferral of up to 12% of the annual taxable income, on a pre-tax basis. The income tax is levied on the withdrawal’s total value (principal plus capital gains) as determined in the applicable legislation.
VGBL - Vida Gerador de Benefícios Livre
VGBL plans are recommended to exempt individuals; investors who do not incur in withholding tax, or who already contribute 12% of their annual taxable income to a PGBL plan and wish to contribute more to a retirement plan. The contributions made to a VGBL are not deductible yearly but only the capital gains are taxed upon redemption.
Fiscal Benefits
| • | Income taxes are deferred until redemption; |
| • | Investors may deduct up to 12% of the annual taxable income when investing in a PGBL fund; |
| • | The applicable tax rate upon redemption may be lower than in traditional fixed income securities depending on the fiscal selection (further detailed in the section below). |
Estate Planning
| • | Should the investor pass away or become disabled, the resources are made available to the beneficiaries, either as a lump sum or as a periodic series of payments, without incurring in a grace period or in legal and judicial costs. |
| • | The selection of the beneficiaries may be altered at any time; |
| • | The plan’s resources are not included in the estate and remain invested until the succession date. |
Investors must choose between two fiscal regimes upon investing in a pension plan.
Progressive Regime:
Under the progressive regime, different tax brackets apply depending on the amount withdrawn, in accordance to the applicable Monthly Progressive Income Tax Table for individuals investors.
Upon withdrawals, a 15% flat tax rate is levied. This amount may then be adjusted if applicable when filing for yearend taxes. Retirement benefits payments are excluded from this condition.
Regressive Regime:
Beginning in January 2005, Law 11033 offered investors a new tax treatment option in private pension plans by creating the Income Tax Regressive Table.
Under the Regressive Regime, the accumulation period is considered and participants are subject to decreasing rates in accordance to the table below:
Accumulation Period Income Tax rate:
| Less or equal to two years | 35% |
| 2 - 4 years | 30% |
| 4 - 6 years | 25% |
| 6 - 8 years | 20% |
| 8 - 10 years | 15% |
| More than 10 years | 10% |
The tax is withheld at the source and may not be compensated in the yearend tax filing. The table applies to both withdrawals and payment of benefits.
FRAM Capital is the Investment Manager of four pension plan funds in partnership with insurance companies Bradesco Vida and Previdência e Icatu Hartford Seguros S/A.:
FRAM Capital Previdência Renda Fixa Longo Prazo
FRAM Capital Previdência Renda Fixa
FRAM Capital Previdência Olsen Multimercado
