Saving for their future retirement has become a major concern for Spaniards, who, seeing their pension fund at risk, have decided to use long-term savings products. These products allow them to secure a complementary money to the retirement pension that they will receive from Social Security, which may be insufficient. Thus, Spaniards are increasingly likely to use long-term savings products such as pension plans, without a doubt the most popular.
However, are there other savings products? Of course, and this is where the PIAS come in. What are these savings products and how do they differ from the rest? What advantages do they offer us compared to other savings systems? In this post we will tell you.
In any case, it is best to request information from professionals with years of experience and solvency such as Euroteide Insurance, because we are specialists in Savings and Investment Insurance, to find out which savings product is best suited to our needs.
What is a PIAS or Individual Systematic Savings Plan?
A PIAS or Individual Systematic Savings Plan is a type of Life insurance through which you save in the long term , so that this product allows the insured to obtain a series of savings with a fixed profitability. Also, these products have a number of tax benefits which can be very interesting. These savings products allow the insured to obtain the insured capital in his policy in case of death. Thus, and although PIAS is a savings product, it is set up as alife insurance.
In any case, in addition to tax benefits, PIAS allow the insured to make sporadic or periodic contributions with the frequency agreed with the financial institution with which this Individual Systematic Savings Plan has been contracted. In addition, regardless of whether the contributions are sporadic or periodic, PIAS allows the creation of a life annuity that the insured will not be able to start receiving until at least 5 years have passed since the first insurance premium was paid.
What advantages do PIAS have?
The main advantage that PIAS offer is their remarkable tax benefits. However, it has other numerous advantages. Let's see them:
PIAS are not subject to liquidity assumptions
They may be recovered when 1 year has passed from the first contribution. This is one of the main differences with pension plans, since they are subject to liquidity assumptions and can only be redeemed in very specific cases.
Although it is possible to transfer a PIAS from one holder to another, each taxpayer may contract a single PIAS. This does not happen with other savings products such as pension plans.
PIAS have significant tax advantages
It is at the time of the rescue when the holder benefits from the tax advantages of the PIAS. This is also a notable difference with pension plans, since they do not have to pay personal income tax when they are incorporated, but they will have to do so when their redemption occurs.
In any case, the PIAS will be taxed, once redeemed, for income from real estate capital as the income is received. In addition, the amount to be taxed will depend on the age of the participant at the time the life annuity begins to be received. Thus, the older you are, the less you have to pay for this income. For example, from the age of 70, only 8% of the income obtained must be taxed, while if it is obtained between the ages of 50 and 59, it must be taxed at 28%.
PIAS will be taxed at 19% in personal income tax if they are redeemed before the first 5 years have elapsed
However, they will be taxed at 21% if the contributions are more than 6000 euros and up to 50, and at 000% if the contributions exceed 23 euros.
PIAS involve formation of an annuity provided they are not redeemed within 5 years of the first contribution.
How is a PIAS different from other savings products?
In addition to the PIAS, there are other savings products on the market that can help us create a good buffer for our future retirement. Let's take a look at what differentiates PIAS from other savings products.
This is the long-term savings product par excellence. It has certain tax benefits, so that the holders of a pension plan do not have to pay income tax on the contributions they make to it, as long as the contributions do not exceed 8000 euros per year. On the other hand, what has been saved in a pension plan can be recovered upon retirement, but also in the event of death, permanent disability, serious illness and long-term unemployment of the participant. Thus, whereas with PIAS, a life annuity is constituted which may be requested when 5 years have passed from the first contribution, pension plans can only be recovered when certain assumptions are made and in the form of a single income.
PPA or Insured Pension Plan
PPAs are also long-term savings plans that aim to supplement the Social Security retirement pension. In addition, they also contain Life Saving Insurance, as is the case with PIAS, which will be collected at the time of retirement, disability or death. Thus, while PIAS can be rescued at any time and under any assumption, provided that at least 5 years have passed since the first contribution, PPAs can only be redeemed under certain circumstances.
PALP or Long Term Savings Plan
PALPs are also a good long-term savings product, aimed above all at the more conservative savers. Thus, these PALPs have a low profitability - much more than previous savings products - designed for the middle and lower classes, since the risks are also much lower. In addition, these plans guarantee, by Law, that their holders, in the worst case, will recover 85% of the investment. On the other hand, it has a series of tax advantages very similar to those of pension plans.
Undoubtedly, there are many savings products on the market, so we can always choose the one that best suits our needs and requirements. It is always best to rely on the experience of many years of well-trained professionals in these savings and investment products. At Euroteide Insurance we will be delighted to advise you and be by your side to be fully successful in the choice that suits your needs and saver profile.