While contributions and market commentary have seemed to favor VGBL private pension plans in Brazil, the PGBL plan market has still not seen the growth it could, MetLife Brasil president José Roberto Loureiro told BNamericas.
With marked growth in the assets under management for private pension funds, which grew 26.5% in the 12 months to end-August, 34.3% in the same period the year before and 43.0% the period before that, the debate as to which fund type, VGBL or PGBL, offers more market potential has gone on.
At end-August, the private pension industry had total assets of 104bn reais (US$56.1bn) under management, with 66.9bn reais in VGBL plans and 37.1bn reais in PGBL plans, according to the latest figures from insurance regulator Susep.
Both plan types hold savings in investment funds and charge a penalty for early withdrawals, but VGBL plans are for taxpayers who file simplified returns and PGBL plans for those who file itemized returns, with the added advantage of a 12% tax deduction of gross annual earnings on contributions.
"When we compare the number of people with PGBL plans and the number of people that declare income taxes [with itemized returns] and are paying taxes without benefitting from this incentive the government is offering them, we conclude there's still a long way to go to increase this penetration," Loureiro said.
This week, private pension federation Fenaprevi leaders came out saying the VGBL market is seen as the real driver of future growth, mentioning that only 5mn people complete itemized returns, while VGBL plans could be open to nearly everyone else in the country.
There were 3.09mn PGBL accounts and 3.14mn VGBL accounts as of end-June, according to the latest Susep statistics, which note that some individuals may have more than one account.
Another difference is that PGBL is more pension-focused than the VGBL plans, Loureiro said, while VGBL plans are being seen as a way to save for other expenses like education and healthcare expenses.
"On the PGBL side, I think it's really more for people looking for a retirement option for the future, whereas the VGBL doesn't have the same approach right now," he said.
"VGBL is getting a lot of money from the mutual funds market just because there is a higher benefit if you go for a VGBL type product in terms of the taxes that you pay over the yield."
Brazil's congress is expected to approve a bill allowing tax benefits for education and health VGBL plans sometime next year.
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