PGBL and VGBL: understanding the differences between these private pension plans

In addition to choosing between PGBL and VGBL, investors can opt for the taxation method that best aligns with their financial planning

When planning their investments to secure a financially stable future, many individuals turn to private pension plans. Among the available options, two prominent choices are the PGBL ('Plano Gerador de Benefício Livre') and the VGBL ('Vida Gerador de Benefício Livre'). But do you know how they differ from each other?

The PGBL, for instance, is highly attractive due to its potential for deducting contributions from the income tax base, up to a limit of 12% of the annual gross taxable income. Essentially, this allows the taxpayer to benefit from a reduction in the tax payable.

But take notice: this tax benefit can only be utilized in 2024 by investors who subscribe to this specific private pension plan or make a contribution to capital by the last business day of 2023, which is December 28 (it is recommended that investments be made a few days earlier to ensure processing in 2023). Additionally, the individual must also contribute to the Social Security Institute (INSS) or to the government employees’ pension fund.

The VGBL, on its turn, does not provide the benefit of deducting taxes from one’s taxable income. Nevertheless, this type of pension plan is regarded as a more straightforward long-term financial planning tool, akin to an investor's "savings account."

PGBL x VGBL

Take a look at the table below for a comparison between the PGBL and the VGBL and gain a better understanding of the characteristics of each plan.

	PGBL	VGBL
Are the contributions tax deductible?	Yes, limited to 12% of the gross annual taxable income*.    *Provided that the investor is also subscribed to the INSS or to the government employees’ pension fund.	No.
Most appropriate income tax return form	Ideal for taxpayers who opt to file their income tax return in full.	Ideal for taxpayers who are exempt or who opt to file their income tax returns using the simplified form.
Taxation on redemption	Taxes levied on the total amount accrued (contributions + earnings).	Taxes levied only on earnings accrued in the plan.
Taxation method	Tax rates may be progressive or regressive, depending on the option chosen at the time of subscription.	Tax rates may be progressive or regressive, depending on the option chosen at the time of subscription.
How are contributions to capital reported on the tax return?	Reported as contributions made in the calendar year, under "Payments made".	Reported as accumulated balance, under "Assets and Rights".

Taxation

Upon enrolling in one of the private pension schemes, the investor will be required to choose between two forms of taxation: progressive or regressive.

Progressive rates	Regressive rates
In this scenario, the progressive Income Tax table is applied, with rates ranging from 0% to 27.5%, depending on how much is redeemed.	Regressive taxation entails decreasing tax rates, ranging from 35% to 10%, contingent on the period between investment and redemption.

What to consider when choosing a private pension plan

Opting between the PGBL and the VGBL essentially relies on each investor’s own assessment, taking into account their individual profiles, preferences, volume of contributions and retirement goals.

Making this choice and deciding on the form of taxation (progressive or regressive) is integral to an individual's tax planning, and it is highly beneficial to seek specialized support at this stage.

Tax advice for individuals

DPC has a department dedicated to assisting individual investors with their tax planning, and provides support throughout the process of reporting to tax authorities. You can count on our tailored support: dpc@dpc.com.br.