Income Tax Changes for Private Pensions


New Flexibility in Choosing the Tax Regime: The enactment of Law 14.803/2024 introduces some changes for participants in private pension plans, such as PGBL and VGBL. Now, it is possible to choose the tax regime—progressive or regressive—at the time of benefit redemption or at the first withdrawal, instead of having to make this choice only at the time of plan subscription.

Previously, according to Law 11.053, from 2004, the decision on the tax regime had to be made by the end of the month following enrollment in the plan. With the new legislation, the choice can be made at a more opportune moment, offering greater flexibility to participants.

Difference between Progressive and Regressive Tables:

Progressive Table: The Income Tax (IR) rates vary from 0% to 27.5%, depending on the amount redeemed. This table follows the same rules applied to salaries, that is, the higher the redeemed amount, the higher the rate. Ideal for those planning high-value redemptions in the short term or periodic low-value incomes.

Regressive Table: The rates decrease over the investment period, starting at 35% for two-year investments and reducing to up to 10% for investments over 10 years. The longer the time in the plan, the lower the rate. Recommended for those looking to accumulate resources in the long term, aiming for retirement, with lower IR rates.

With the new measure, it is crucial to analyze each case individually. Thus, for those who can wait 10 years, the regressive regime may be more advantageous, especially if the income is high. However, if the participant’s income is lower, the progressive table might be more appropriate. The type of the individual’s income tax declaration (complete or simplified) should also be considered.

The choice between progressive and regressive tables is not just a matter of rates but also an investment strategy and financial planning. With the ability to opt for the tax regime at the time of redemption or the first withdrawal, participants now have the opportunity to assess their financial circumstances at a crucial moment, considering factors such as investment time, expected income, and type of IR declaration.

An important detail concerns the possibility of changing from progressive to regressive not considering the time already invested under the progressive regime.

Law 14.803/2024 represents a significant milestone in the management of private pension plans in Brazil, offering participants unprecedented flexibility in choosing the tax regime. This new approach reflects an advancement in adapting fiscal policies to the individual needs of taxpayers, allowing them to make more informed decisions aligned with their long-term financial goals.

This legislative change is particularly beneficial for those who may not have clarity on their investment horizon or who experience changes in their financial circumstances over time. The law also addresses a previous gap, where the immediate and irrevocable choice might not have been the most advantageous in the long term, leading to possible tax inefficiencies


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