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Saving is not just saving, if you don’t know how to spend

It may be that retirement is the golden age: living quietly without any obligations, enjoying your day to day life, not getting up early to go to work. However, we are afraid of reaching retirement and losing our quality of life, not being able to handle unexpected expenses or even habitual expenses. Therefore, it is very important to start saving and the sooner the better.

1.- Systematic Savings Plan (PIAS). It was created by the Personal Income Tax Law, and its objective is to offer a systematic saving instrument whose income is exempt from paying taxes provided that it is held longer than five years and is received in the form of an annuity. It has a maximum contribution limit of €8,000 per year and the accumulated premiums shall not exceed €240,000 per taxpayer. It is fully or partially redeemable from the start, although tax exemption would be lost.

2.- Individual Long Term Savings Insurance (SIALP). Law 26/2014 modified the previous Personal Income Tax Law, creating this new savings instrument, but in this case targeted small investors. The payment cannot exceed €5,000 per year; the provision may only be in the form of capital for the total amount of the plan, not partial provisions. This product guarantees that at least 85% of the money invested will be redeemed. Personal income tax returns are exempt for five years as long as there is no redemption in less than five years.

3.- Insured Pension Plans (PPA). They are regulated by Law 46/2002, Income Tax Partial Reform. It is an insurance contract consisting of the payment of guaranteed capital at retirement. It is not redeemable except for long term unemployment or serious illness that would not be penalized.

4.- Unit Linked. It is more an investment product than a savings product, where the person taking out the insurance assumes all investment risks. There are no limits on contributions and you have full availability over them.

There are other types of savings, such as Guaranteed Capital Insurance, Life and Term Income, Income Insurance… The most important thing is that hiring these is as personalized as possible, meeting the real needs and circumstances and for that, the best is to visit experts and professionals such as we have at our Brokerage.