Deposits, letters, funds or pension plans: where is the profitability?


Depositors’ fury at sovereign debt comes in a context of nearly unpaid bank accounts and in light of the usual fear of entering stock market products

Take advantage of the money. Squeeze it in as much as possible. That is the goal of thousands of Spaniards who today buy Treasury bills en masse to achieve the profitability they still do not see in bank deposits, and which stock market products (mutual funds, pension plans, etc.) do not offer if it does not come at the cost of too much risk. The queues at the doors of the Bank of Spain’s headquarters to collect government debt show the image of the need to invest that many citizens have. What does each of the products that come for you offer? Let’s see.

It’s the classic option that you allocate the savings to. In the bank account. In fact, this option is so widespread that deposits as a whole are already saving more than a trillion (with ‘b’) euros in these products. The money collected during the pandemic has increased significantly and now the holders do not know where to take it. Because despite the interest rate hike approved by the European Central Bank (ECB) since last summer, the average return on deposits has barely gone from a frozen to the current 0.6%. Six euros reward for every 1,000 euros. For the time being, the bank does not intend to increase this fee too much. They claim they won’t do that until the competition shifts. And they in any case recommend other products to avoid classic savings, such as certain low-risk investment funds.

Bank deposits are only taxed on the profit and not on the initial capital invested. They are taxed as capital gains in the income statement. For example, if a deposit of 15,000 euros is entered into. With this deposit we reclaim the EUR 15,000 contributed and a return of EUR 1,000 is also obtained. In this case, you only have to pay the taxes corresponding to the 1,000 euros of income, but not the 15,000 initially contributed. Also keep in mind that maintenance fees are usually charged.

Treasury bills have become the star of investing in early 2023. Their price accurately reflected the rise in interest rates. In reality, it is a product that allows its holder to earn an attractive return, while at the same time enabling the state to finance itself. In addition, the risk is minimal as the possibility of Spain going bankrupt is slim as it is guaranteed by the Treasury. For 1,000 euros invested in this asset, you will receive 30 euros a year in advance.

Those who buy Treasury bills should bear in mind that the generated yield, regardless of the term, is taxed at a rate of 19% up to EUR 6,000, the tranche of the taxable base between EUR 6,000 and EUR 50,000 is taxed at 21%. and the bracket of more than 50,000 euros is taxed at 23%. In addition, it must be borne in mind that their comfort implies that they have to assume higher costs due to the commissions they charge, which are generally between 0.2% and 0, lying 3%.

There is a wide variety of funds to invest in. From the most conservative, where the risk is lower, but also the profitability they offer; even the most aggressive, with which you can gain a lot by risking too much. For this reason, profitability varies greatly depending on the type of fund and the years the investment remains in it. It all depends on each saver’s profile, what they want to achieve with their money and their expectations. Banks now also offer sovereign debt funds. The advantage of this type of product is that the investment can be moved from one fund to another at any time (so-called transfer), without having to pay tax on the profit obtained. The funds also have commissions such as subscription, redemption, management, deposit and even the so-called ‘success’.

Until a few years ago, this was the pension savings product. However, the lower tax benefits that the pension plans now have, together with an untapped rate of return and the commissions, have caused holders’ contributions to fall year on year. From a tax point of view, the contribution paid in one year makes it possible to reduce the tax base in the personal income tax of the holder. If you get the money back at retirement, however, you’ll have to pay any taxes that weren’t paid during the savings period.

Source: La Verdad


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