Key data

Retirement products in Brazil are made up of personal retirement products, corporate pension funds, mutual funds, and state pensions.  

Retirement insurance products compete with a number of other financial vehicles in Brazil, including:

• Savings accounts
• Mutual Funds
• Cash value life insurance (which will soon include Universal life and Variable Universal life insurance).
• Annuities
• Stocks and bonds
• Certificates of Deposit

Traditional personal pensions
Personal pension plans consist of traditional plans, typically offered by insurance companies, as well as PGBL products, also offered mainly by insurance companies. Personal pension plans were introduced in Brazil in about 1993. Since then, the sector has grown very rapidly. Insurers connected to the large retail banks dominate the market. The top five insurance companies offering these products account for over two thirds of total sales. Additionally, non-profit pension companies, and other commercial private pension companies account for approximately one fifth of sales.  These entities are now significant institutional investors.

Traditional pension plans guarantee the investor a minimum rate of return, and a lifetime income. On the other hand, fees are relatively high, and there is limited flexibility for the investor.

PGBL Plans
Personal pension plans consist of traditional plans, typically offered by insurance companies, as well as PGBL products, also offered mainly by insurance companies. Personal pension plans were introduced in Brazil in about 1993, followed by ‘PGBL’ plans in 1997. The first PGBL products were available in the market in 1998.

These plans are broadly similar to traditional personal pension plans, in that they are portable, and have certain tax benefits for the investor. However, unlike traditional plans, PGBL plans offer the investor (and an employer) greater flexibility, and more responsibility and choice over investments and investment performance.  PGBLs are similar to variable annuities and allow participants to invest in a host of mutual funds such as fixed-income, equity and real estate, except international investments.

PGBL plans have been extremely successful, particularly among employers, who have seen these as either an attractive supplement to, or an alternative for defined benefit pension funds. 

PGBL have some tax advantages in comparison to rival permanent life insurance products.  They allow tax-deferred accumulation, and the premiums are income deductible up to 12% of gross income for the customer.    Additionally, they are not subject to the 7% IOF tax that life insurance products face.

However, in contrast to life insurance, insurers are subject to certain caps on the costs that can pass on to PGBL customers