In January, the 5% financial-transactions tax stopped applying to annual VGBL contributions of R$300,000 or more at each insurer. It now applies only to amounts above R$600,000, based on each participant’s total contributions across the market.

“It shows, to some extent, that participants understand this money is indeed for the long term and that withdrawing it carries a penalty if they want to return,” said Ângela Assis, CEO of Brasilprev. “But there is no denying that the IOF hurt the sector.”

Rogério Calabria, head of investment and pension products at Itaú Unibanco, said the propensity to save has increased. “There is the issue of high debt, on average, across all income levels, and people are trying to rebuild some of their wealth,” Calabria said. “The war leads to that, interest rates that were expected to fall and are not falling anymore also lead to that, and there are significant uncertainties. When that happens, people hold back on spending and become more conservative in their investments.”

Data for the first four months from the National Federation for Private Pension and Life Insurance (Fenaprevi) show net inflows fell 7.8% from the same period in 2025, to R$6.7 billion. Contributions totaled R$54.1 billion in 12 months, down 8.3%, while withdrawals dropped 8.5% to R$47.4 billion. Through March, net inflows had grown 7.2% in 12 months, precisely because withdrawals declined 10.7%.

Regulatory uncertainty

For Fenaprevi’s president, Edson Franco, the tax has had a spillover effect even on Free Benefit Generator Plan (PGBL) plans, which are not taxed upon contribution, because of the regulatory uncertainty it created.

“Investors end up turning to other accumulation products. There are pension products that do, in fact, offer tax incentives for long-term retention, but Brazil has this inconsistency of offering very short-term instruments with full tax exemption,” Franco said, referring to tax-incentivized credit securities. “When clients also see a penalty at the point of entry, meaning a reduction in the nominal amount contributed, they naturally step away.”

Franco said the industry stepped up communication with participants and has run campaigns to attract new money, helping soften the IOF impact. “Last year, the drop in inflows reached 20%, and this year it was 8%, largely because of the effort by entities to explain who is subject to the tax.” He said he still does not have a clear read on what drove the reduction in withdrawals and that it remains to be seen whether the movement will become a trend.

This is an important market for the formation of long-term savings, and the industry “made a major effort for years to spread financial education and convince society to invest,” said Marcelo Flora, partner at BTG Pactual and CEO of its insurance and pension unit. He expects the government to eventually review the toll, given the contradiction of taxing those who are planning for the future at the point of entry.

“Those who already have accumulated resources now think twice before making a withdrawal,” said Érico Soares Neto, director of BTG Vida e Previdência. Soares Neto said inflows rose 7% this year, to R$1.08 billion, driven by a slower pace of outflows.

At the end of April, 11.2 million people in Brazil had some type of private pension plan, with reserves of R$1.8 trillion, equivalent to 11% of GDP. That is still limited for a relatively young industry that had been expanding year after year until it hit the brakes in the middle of last year.

According to data from Anbima (Brazilian Financial and Capital Markets Association), the funds that hold the sector’s reserves had posted net withdrawals of R$7.1 billion this year through June 17.

“We feel the lost opportunity because pensions could be performing much better if not for this aberration,” Franco said. “Taxing income is what is expected from accumulation products, with a tax incentive for the long term. That is what is done around the world, never taxation at the accumulation stage. This is a punishment for prudent behavior.”

Long-term appeal

Private pension plans have so many advantages that, depending on the situation, they are still worth considering, including for amounts above R$600,000, said Gustavo Lendimuth, a senior executive in Santander Brasil’s distribution and advisory area.

Lendimuth cited long-term tax deferral, the absence of so-called “come-cotas”, the semiannual advance tax charged on other pooled funds, and a rate that falls to 10% after 10 years under the regressive tax table as some of those advantages.

Pension plans also help simplify estate succession, without going through probate. “It is a solution for different needs: for those who want to accumulate, transfer resources or invest for the medium and long term. From five years onward, it is already advantageous.”

With R$484.2 billion under management at Brasilprev, Assis said the first months of the year were productive despite the IOF blow. In BB Seguros’s earnings presentation, the company that controls Brasilprev reported a 10.2% increase in pension reserves and inflows of R$3.9 billion, compared with withdrawals of R$1.5 billion in the same period ended in March 2025. Contributions rose 9% in 12 months, to R$15 billion. Recurring net income in the first quarter was R$538 million, up 51% from a year earlier.

For this year, the insurer projects growth of 8% to 11% in pension reserves.

At Itaú, the IOF on VGBL plans forced a change in strategy, Calabria said. He said the use of data technology made it more efficient to attract clients from competitors through pension plan transfers. “Now there is this need because the market has become smaller.”

With R$351 billion in pension assets, Itaú has also focused on PGBL, which is not subject to the IOF and is a product the bank already leads in sales and knows how to sell.

The product is used by taxpayers who file the full income tax return and can deduct up to 12% of taxable income, increasing their tax refund. “Our client understands it. It is an advisory product, and we have been explaining that some clients could be better allocated in PGBL than in other investments; [the client] has to reallocate, it is a benefit they are leaving on the table,” Calabria said.

Another front has been expanding the client base, lowering the average ticket and bringing more people into the product.

Calabria said the first four months were productive also because Itaú, like other peers, moved quickly to attract clients who reach the IOF limit on VGBL plans.

“That high-value client who has R$600,000 to allocate in the year across all insurers, we wanted to reach first.” Inflows through April reached R$4 billion, half of which came from transfers.

Despite the slower pace, Calabria expects the sector to grow this year, partly because high interest rates provide an organic boost to invested reserves. “The IOF has an impact, there is no doubt, but the market has not ended. The sector is rearranging itself. It will grow less than it had been growing, but it is too early to make very pessimistic or very optimistic projections.”

He said he still sees demand for the product, but some investors have lost interest. It has become harder to sell the product and explain the IOF, Calabria said. “There is no way not to be concerned about the rule change. It scared off some clients who think it is better not to touch this.”

Competition and transfers

Lendimuth, of Santander, said the group is gaining pension market share again this year after the IOF change. “This is a reversal that was planted,” he said. The executive said that, while clients could still contribute R$600,000 without the new tax until the end of last year, the commercial focus was on executing those contributions. Now, the effort is concentrated on transfers and retention. “It was the best first quarter for new contributions, but we planted a lot of transfers, which we will harvest in the future.”

He said face-to-face work by investment specialists at AAA offices has made a difference, since pension plans are predominantly consultative sales. The bank redesigned incentives, expanded its sales repertoire and improved the timeliness of information.

In general, insurers linked to the large banks suffer the biggest losses, but Itaú has managed to defend its ground through consultative sales.

In the first four months, according to Susep, Brazil’s private insurance regulator, Itaú Vida e Previdência retained nearly R$2 billion on a net basis, considering amounts accepted and ceded. Bradesco Vida e Previdência lost R$1.3 billion, followed by Brasilprev, with R$827.3 million; Caixa Vida e Previdência, with R$297 million; Zurich Santander, with R$290.5 million; SulAmérica, with R$226.2 million; and Icatu Seguros, with R$82.5 million.

Newer players moved in opposite directions, with BTG attracting R$1.3 billion and XP Vida e Previdência losing R$38.5 million, after being one of the leaders throughout 2025.