Private pensions are a popular investment option among those looking to supplement their retirement and have an additional source of income after stopping work. There are those who use this type of investment for inheritance purposes, leaving it to heirs, or saving money for their children’s education.
For analysts, this method is an interesting alternative to pooling resources over the long term because it offers tax advantages. However, identifying a safe financial institution to make contributions and a pension plan appropriate to the risk profile are precautions an investor must take.
Investing in private pensions can also reduce income tax for those who file the return in the full form and choose a PGBL (Free Benefit Generation Plan) type plan.
This method can be a useful tool for succession planning, because it allows resources to be transferred to beneficiaries without the need for inventory.
Tax advantages are advantages
For experts, the tax advantages are the main advantage for those who have the possibility of maintaining their investments in the long term, as it allows them to pay an income tax rate of 10%, if they choose the descending schedule and maintain the investment for at least ten years. For example, investments such as commercial development banks and direct Treasury bonds have a minimum tax of 15%.
According to Stefano Tremia, CFP financial planner at Planejar (Brazilian Financial Planning Association), annuities are a viable option for those doing succession planning. ITCMD (Transfer Tax on Death and Donation), the state inheritance tax, is not levied on VGBL (Free Generating Life Benefit) and PGBL-type pension funds – something the STF (Federal Supreme Court) has decided.
Portability, the ability to transfer the plan between financial institutions, is also an advantage. Merian Lund, professor of personal finance at FGV (Fundação Getulio Vargas), highlights that the investor can reapply the amount in another product, from the same institution or another, without having to recover and pay income tax.
Closed or open private pension?
Closed-ended pensions, also known as pension funds, benefit employees of a particular company, public employees of state-owned enterprises or representatives of professional classes – such as federal teachers. Examples include Previ (from Banco do Brasil), Funcef (from Caixa Econômica Federal), and Petros (from Petrobras).
According to Brevik (National Supervisory Authority for Supplementary Pensions), pension funds totaled R$1.4 trillion in pension reserves in September 2025, equivalent to 11% of Brazilian GDP (gross domestic product). The sector’s annual revenue reached R$67 billion as of the same month.
An open option is sold by financial institutions – banks and insurance companies – and can be contracted by anyone. Examples include Brasilprev, Bradesco Vida e Previdência, and Itaú Vida e Previdência.
According to Susep (Private Insurance Supervisory Authority), plans open in VGBL format totaled R$1.4 trillion in August 2025. During the year, contributions received amounted to R$7.7 billion (PGBL) and R$89.3 billion (VGBL).
What are the differences between PGBL and VGBL?
In financial institutions, i.e. among the open pension plans, the investor will need to choose between PGBL and VGBL.
The PGBL is an option to supplement retirement income and is usually adopted by those who opt for a full income tax return form. Under the scheme, it is possible to deduct up to 12% of annual taxable income with the private pension, which may increase the refund or reduce the tax payable for the year.
In VGBL, there is no such discount. Coordination is considered personal insurance. The method is more suitable for those who advertise using the simplified form.
Income tax is levied on the total value of PGBL (including income). In VGBL, IR applies only to income.
Retro or progressive table?
The 2024 Act changed the rule for choosing a private pension tax system. Previously, an investor needed to choose a progressive or descending schedule when contracting a plan. Now, he can use the table that is most beneficial to his case when making a refund, and this applies to VGBL and PGBL.
In a progressive schedule, the financial institution retains 15% of the rate of return at issuer, as an advance payment, when the redemption is made. The final rate is calculated on your income tax return and can be up to 27.5%.
In the descending scale, the percentage decreases depending on the duration of the investment: it starts at 35% for investments of up to two years and reaches 10% for periods of more than ten years.
Saving or income?
Private pensions have two stages: accumulation and usufruct. In the accumulation phase, the participant makes contributions that can be sporadic or periodic – without a mandatory minimum of repetition. The assets are invested according to the chosen plan.
There is no requirement to finish this stage: the investor can stay in it for as long as he wishes.
When you decide to take advantage of the accumulated value, you can choose different ways to obtain it. It is possible to make sporadic withdrawals, usually every 60 days or according to the insurance company’s rules, or withdraw the entire amount at once.
The other alternative is to convert the accumulated balance into income, according to the formulas provided by the institution. Lifetime income guarantees monthly payments until the owner dies; Lifetime income with return to beneficiary provides for continued payment to a spouse or dependent after the death of the investor; A temporary income stipulates monthly payments for a specific period.
How do private pension administration fees work?
It is charged to all funds and rewards insurance companies that administer supplementary pensions. In the case of private pensions, it affects total capital, including income.
According to Stefano Tremia, from Planejar, the ideal solution is to avoid plans with interest rates above 2% for fixed income products, as this reduces profitability. “You need to look for plans with interest rates between 0.3% and 0.5% per annum.”
For Antonio Sanchez, research analyst at RICO, it is essential to compare the chosen retirement plan with other similar funds. “To evaluate whether the price is advantageous, it is necessary to check whether the profitability offered is in line with the market,” he says.
High taxes in the short term and lack of protection for female genital mutilation are disadvantages
Anyone who chooses the rollback schedule and makes a withdrawal in less than two years can pay 35% income tax. This percentage is high to encourage investors to maintain their contributions for a longer period.
There is a risk of investing in an insurance company that is not very strong. The private pension is not covered by the FGC (Fund Credit Guarantee). If the organization responsible for the plan goes bankrupt, the investment may be lost.
Demand deposits, such as community development banks, are covered by FGM. In the event of bankruptcy of the bank or insurance company, investments amounting to R$ 250,000 per CPF or CNPJ are compensated by the Guarantee Fund.
Does the increase in occupation forces affect private pensions?
The decree to increase the financial operations tax led to turmoil in the sector. With the new rule, ratified by Minister Alexandre de Moraes, of the STF, anyone who invests more than R$600,000 (or R$50,000 per month) in VGBL will pay 5% IOF on the excess amount in 2026. The limit will be by CPF.
Until then, contributions made between June 11 and December 31, 2025 will be taxed if they exceed R$300,000 per insurer.
For Merian Lund, the biggest impact falls on investors who may make significant contributions. “If an investor wants to invest R$3 million in his pension for inheritance purposes, it will take a few years to do so and avoid high taxes,” he says.
“This measure affects middle-class people, aged 60-65, who have sold a property and can invest the amount in pensions, but they will need to divide the investment into short-term investments,” says Estevao Scribiliti, member of the Risk Products Committee at Finaprivé.
Does a private pension replace retirement? What are the differences?
From the analysts’ point of view, no. Private pensions should be viewed as a supplement to retirement, not as the sole source of future income.
The value of INSS pensions ranges between the minimum wage (R$1,518) and the maximum (R$8,157.41 in 2025). The 2019 Social Security reform reduced the value of the new pensions, as the average salary calculation stopped excluding a worker’s lower contributions.
Among the investment options for retirement are Tesouro Renda+ and private pensions.
Those who contribute to Social Security also have access to benefits such as sickness benefit, maternity pay, and accident benefits.
Private annuities allow redemption before the deadline specified at the time of contracting, as long as the rules of the contract are respected. INSS can only be retired after reaching the minimum subscription period and age.
What are the most common mistakes when choosing a private pension?
According to Stefano Tremia, of Planigar, it is important to check the solidity of the insurance company, evaluate the management fees and ensure that the fund’s strategy is compatible with the investor’s profile.
“If I have a conservative profile, it doesn’t make sense for me to have a private pension plan that invests in stocks. I have to have a pension plan that matches my strategy,” he says.
Another common mistake, according to SulAmérica Director Victor Bernardes, is keeping money in Social Security without a specific purpose. “What are you going to do with this money? Are you going to pay for your health, travel, or not give your children work? When you put it to work, it becomes more difficult to spend.”
For Bernardes, emergency funds should not be confused with private retirement funds, because in the event of an emergency the client will have to take back money that is “expensive in the short term” and will pay more taxes. “He will not benefit from the benefits of private pensions as he should,” he says.
For Merian Lund, choosing one pension plan with large amounts, and ignoring that redemptions are only allowed every 60 days, can also be a problem.
Is a private pension a useful inheritance option?
Private annuities can also provide flexibility in the asset transfer process by not listing them in inventory, which is a legal procedure for sharing assets.
Applications such as commercial development banks, treasuries and investment funds are blocked during the process. “As a rule, the amounts remain frozen until the inventory is completed and the participation is formalized, after the necessary documentation has been submitted to the financial institution,” says Luciana Pantarotto, a lawyer specializing in succession and tax planning.
For her, family members of the deceased benefit from faster liquidity, “with amounts being released within a few days after submitting documents, without the need to wait for the inventory to be completed.”