Become someone who takes the (retirement savings plan with tax incentives) apart before buying it
In 5 min you'll know: how to dissect a PPR and compare it against other savings by total cost
In Block 1, Lesson 6, you started saving with purpose and we discussed as one possible destination for long-term savings. Now let's open the PPR from the inside and see if it makes sense for you — no myths, no bank pressure. The rule: compare the PPR with other long-term savings options before subscribing, using total cost as the criterion.
Before you continue: if your emergency fund is growing, what's the difference between saving and investing — and when should you switch?
(Answer in the next paragraph.)
PPR is a financial product sold as the solution for retirement. It isn't. It's a product with a tax benefit (you deduct up to 20% of contributions on your (Portugal's personal income tax) return, within limits) but with costs that can eat that benefit entirely. If your PPR charges a 2% annual management fee and a 3% redemption fee in the first 5 years, the €80/year tax benefit can be completely swallowed by costs. The bank won't tell you this at the sales meeting — you have to work it out yourself.
There are three types of PPR: guaranteed (capital guaranteed, low return — typically 1-2%), bond-based (invest in bonds, moderate risk) and equity-based (invest in shares, higher risk). The "guaranteed" version your bank offers isn't an investment — it's a disguised term deposit with higher fees. If the net return (after fees) is below inflation, you're losing purchasing power every year. The tax benefit is real, but it doesn't compensate for a product that destroys value.
When you exit the PPR matters as much as when you enter. If you redeem before 5 years, you lose the tax benefit and pay a penalty. If you redeem after 5 years and after retirement age, you pay 8% IRS on the accumulated amount (including returns). If you combine it with employment income, you're taxed at your marginal rate. PPR is advantageous when: (1) the tax benefit exceeds the costs, (2) you hold the plan for >10 years, and (3) the investment profile suits your timeframe and risk.
Compare: a PPR with a TER of 1.5% and a gross return of 4% gives 2.5% net — less than a bond ETF with a TER of 0.2% and a gross return of 3.5%, which gives 3.3% net. The PPR only wins if the tax benefit compensates for the 0.8 p.p. difference during the accumulation period. Calculate. Compare. Decide with numbers.
Notice: Mowei is a financial education and comparison platform. We are not investment advisors authorised by the . This lesson is general information, not personalised advice. For decisions about specific products, consult a financial intermediary registered at investidor.cmvm.pt.
Compare PPR against other savings by total cost (3 min) →
Your promise: This month, Saturday at 2pm, I will compare the PPR against 2 savings alternatives by total cost.