If you are looking for a financial product with the objective of saving or obtaining profitability in the short, medium or long term, it is best to contact professionals who can help you find the most suitable product. At Euroteide Seguros we can advise and help you to choose the best option for you, always being by your side to be able to inform you of the evolution of your savings plan during its period of duration
You may have heard of various ways to save and wonder about, for example, how savings plans work and if they are the best product for you. Keep reading and we will help you solve your doubts regarding this product and you will know if it is what you are looking for.
What is a savings plan
The savings plan It is a financial product whose final objective is savings through the obligation to contribute certain amounts periodically, thus automating the savings of the person who hires it.
Besides saving with this product too profitability is obtained, since generates interest.
Another advantage of this product is the low risk That implies compared to other products, such as pension funds.
How a savings plan works
Savings plans are created for people who want to save, but need to have their available money in the medium term, since the usual duration of these products is usually 5 years, although this can be variable.
This product is usually materialize in one of the following ways:
- Individual Life Insurance or Long Term Savings (SIALP). With this first way of doing it, a life insurance is contracted with an insurer, assuming a very low risk and long-term profitability. It has the peculiarity that, at the time of contracting, the policyholder will have to be added to the Insurance as a beneficiary of this.
- Individual Long-Term Savings Account (CIALP). Unlike the previous case, in this way of formalizing the savings plan, something that could be defined as a deposit is contracted with a financial institution. It is done by opening an account in which the profits generated by the money saved by the person who hires the product are entered.
Both options offer some interesting features and benefits, such as the Money-back guarantee of a minimum of 85% of the capital saved. Some insurers offer a 100% refund of the capital saved.
It should be noted that the same client You can only contract one of these two products to carry out the savings plan. Also, you will have to keep it for 5 years to benefit from tax advantages that they offer, although you have the possibility of withdrawing the money whenever you want, renouncing these advantages.
The main difference between the two is that SIALP, being an Insurance, is guaranteed by the General Directorate of Insurance and Pension Funds while the CIALP, being a banking product, is subject to the rules and guarantees of the Bank of Spain.
In addition, there may and in fact there are some differences in terms of the amount of contributions or profitability, so it is convenient to analyze both products before deciding which is more advantageous when it comes to materializing the savings plan we want. The interest rate and commissions offered by insurers is generally significantly higher than that of banks, additionally offering profit sharing bonds and automatic product renewals.
Assets in which it is invested
Unlike other products, such as pension plans, savings plans usually invest most of the money deposited in fixed income assets. The most common are government bonds and obligations and Treasury Bills.
Contribution limits to the savings plan
There is a maximum amount for the two types of savings plans. The amount deposited in these products it cannot exceed 5000 euros per year.
Both in the Life Insurance option and in the bank deposit, the holder can benefit from a exemption from personal income tax in the profits generated, with a maximum per year of 5000 euros.
Recovery of invested capital
In this type of products, the money deposited for savings in either of the two modalities will always be available in order to be withdrawn. Nevertheless, If the funds are withdrawn before 5 years, the tax exemptions are lost and you will have to pay taxes on the benefits obtained.
Therefore, if you have doubts about the operation of a personal savings plan, as a summary of its operation we could say that savings plans can be carried out through Life insurances or deposits in banks. The contracting person will have the obligation to make periodic contributions for the established amount that will be invested in fixed income assets. The amount invested can be recovered at any time, but the tax benefits will be lost if it is done before 5 years. Meaning that these savings instruments are much more flexible and their profitability significantly better with Insurance companies.
Is it a good idea to hire a savings plan?
The answer to this question is not so simple as it does not depend solely on the characteristics of the product but on the objective that it pursues with it. Therefore, it will depend on the person who hires him.
If you are looking for a financial product that helps you save and is safe, this is a good option for you. In case you are looking for a great profitability in the short term, this product is not the one.
In general, with these savings plans you have nothing to lose, since little or no risk assumed with them, and it can be a way of help you save and generate some profit.
As we have seen, a savings plan is a financial product that aims to save by contributing amounts periodically. This can be done through life insurance or through a bank account, being guaranteed in both cases. These contributions are invested in fixed assets and tax benefits are obtained if they do not exceed 5000 euros per year, being able to recover the deposit at any time.
If you still have doubts about what a savings plan is or how savings plans and any other product to save in the medium and long term work, Get in contact with us. At Euroteide Insurance We will solve your doubts about this product and we will tell you in detail what are the advantages it has and how to hire it to start saving with it.