What are pension funds?
Pension funds constitute assets exclusively dedicated to implementing one or more pension plans.
They establish the conditions entitling beneficiaries to receive retirement pensions, as governed by Law no. 70/2013 of August 30.
Types of pension funds
- Closed pension funds— restricted to one or more associated entities linked by business, professional, associative, or social ties.
- Open pension funds— open to any participant accepted by the managing entity, categorized as:
- Collective membership (for companies funding employee plans);
- Individual membership (for private individuals);
- Mixed membership (allowing both).
Purposes of pension funds
- Pay-as-you-go — current-year wealth is distributed to retirees via Social Security contributions.
- Capitalization — savings accumulated during a worker’s career to fund their retirement.
Establishment
- Closed funds— created via written contract between associated entities/founders and the managing entity.
- Open funds— established when the managing entity adopts a Fund Management Regulation, published in the Diário da República. Membership is formalized through individual or collective adhesion contracts.
Corporate advantages
Beyond tax optimization, pension funds serve as powerful tools for talent retention and attraction. Key benefits include:
- For companies: Contributions are fully deductible as labor costs and exempt from Unified Social Tax (23.75%), Compensation Fund (0.925%), and Guarantee Fund (0.075%).
- For employees: Contributions avoid the 11% Social Security tax and immediate IRS taxation, maximizing retirement, disability, or survivor benefit savings.