We write this so you can have things clear. Saving for retirement is one thing, one goal. But the goal can be reached by different paths. If there are different paths it is because there are different types of walkers, that is, different savers. Each product, whether an insured pension plan or a pension plan, has specific characteristics that suit one or the other savers. It is important not to buy a product that does not fit what you want, and that is why it is important to understand the differences.
The two main ways of saving individually are through an individual pension plan and an Insured Pension Plan or PPA . Here we are going to explain each of them.
The main difference between a PPP and an individual pension plan is in security. The PPA will always guarantee that when you go to retire at least you recover the money you have invested in the product , have happened what happened to the financial markets. In the case of the individual pension plan , the plan can not of itself offer any guarantee, so it is not possible to ensure that the client will recover the contributions made at the time of retirement.
This can be a very important nuance when we are talking about savings for retirement. There are many people, with a conservative investment profile, who do not want their retirement savings to be exposed to market volatility and, therefore, it gives them much peace of mind to know what happens in the financial markets, All the money they have invested is safe from fluctuations.
Difference between PPA and pension plan: Myths and legends
When defining the differences between a PPP and a pension plan, it is necessary to combat some beliefs installed in the common imaginary that are not true . One of the most common is the following: ” I have a plan that I invest in fixed income and therefore I can not lose “. False. The value of fixed income fluctuates in markets such as equities , depending on factors such as the evolution of interest rates and the famous risk premium.
Another common belief is that ” in the long run saving on equities in a product that offers no guarantee will always be much more profitable than investing in a guaranteed product .” Well, it depends. Many factors need to be evaluated. It depends, for example, on your risk profile. It also depends on how much time you have left for retirement. The most important thing is to be informed, advised and, based on that information, analyze which product for retirement is best for you.
Are PPPs and pension schemes compatible?
The good news for the saver is that the pension plans and pension plans insured are perfectly compatible and they are in continuous competition, being able to be transferred from one to another, as many times as you want, without incurring any fiscal cost.
That is, you can invest part of your money for retirement in a pension scheme and another part in a PPA and thus diversify the risk. Or if you still have enough left over to retire, you can adopt a strategy of investing in pension plans when financial markets are bullish, and transferring your money to a secured pension plan when you anticipate the market going down and you need to protect my savings For retirement.
You can also invest more in a PPP when interest rates are high, as was some years ago, and less when interest rates are lower.