Should You Contract Retirement Companies?


With the relatively recent introduction of the private pension system, we could say that the palette of retirement saving instruments has become larger. In this regard, retirement companies play an important role. Thus, in addition to the state pension pillar, participants under 35 years contribute mandatory and those between 36 and 45 years optionally, the mandatory private pension (pillar II) and voluntary pension (Pillar III). In addition, insurers have to offer policies with component retirement life – products that represent solutions for retirement income support.

Advantages of Retirement Companies

If we refer only to optional solutions of this potential product portfolio for retirement – Pillar III and life insurance pension component – it must be said that although they have a similar purpose, each of the two has specific characteristics and advantages.

First, even if it is also meant for retirement savings, the financial plan provided by retirement companies has the main role of assuring your life. In other words, its main role is to provide financial protection for unforeseen events and, in addition, to provide a means of investment. In addition, the financial component of this pension plan allows the contractor to add, depending on the need and demand to the insurer, different extra insurance options.

More and more retirement companies offer life insurance with retirement component, which allows the contractor to choose one age at which he/she benefits from the accumulated amount in the account. This represents a suitable means of saving for those who want to retire before the age standard. At the end of the first payment period, the insured can choose either to collect the full amount at the time the account or benefit for a given period, the annuity. Voluntary pension (pillar III) is a product exclusively for additional retirement savings and the amount accumulated in the participant’s account is available only after the age of 60 years, being granted by retirement companies.

Retirement Companies

The two products work differently and in case an unforeseen event happen to you. Thus, if the person who contracted insurance policy with pension component dies, his/her loved ones will benefit from financial protection. In this case, the insurer pays the sum insured – a set amount from the start and is guaranteed regardless of the number or value of the premiums paid by the insured event. The voluntary pension, on the other hand, comes when the participant suffers from a permanent disability and cannot continue contributions. In this case, he/she benefits from money raised in account as a payment. In case of death, the legal heirs receive money from the account. Both these products are provided by retirement companies.

The voluntary pension can contribute monthly, with up to 15% of gross income, to which the employer can contribute further (if he wants to) or you can contribute together, respecting the maximum limit of 15% of gross monthly salary. By comparison, life insurance from assurance and retirement companies gives you the freedom to participate with the amount you want and allows you to set single premium payment frequency.

Regarding the tax treatment of contributions, it differs in these two products. The amount that you contribute to the voluntary pension is deducted from income tax, a maximum of 500 USD per fiscal year. This benefit is available only for you and for the employer, if he participates in your pension. In case of life insurance from retirement companies, the investment is not taxable, neither the payments you receive.

Last but not least, the two products are regulated and supervised by different authorities, the same companies that provides and manages. Thus, the insurance market (and thus the component life insurance scheme pension) is regulated by the Insurance Commission, while the private pension market is regulated by the retirement companies in charge.

Written by H. Abbas

My name is H. Abbas. I blog, therefore I am – And I am a real web enthusiast that loves to write on several topics and niches. If you like (or dislike) my posts then please comment and I will be sure to read and comment back!

H. Abbas

My name is H. Abbas. I blog, therefore I am - And I am a real web enthusiast that loves to write on several topics and niches. If you like (or dislike) my posts then please comment and I will be sure to read and comment back!

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About H. Abbas

My name is H. Abbas. I blog, therefore I am - And I am a real web enthusiast that loves to write on several topics and niches. If you like (or dislike) my posts then please comment and I will be sure to read and comment back!

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