You will still have time to legally reduce your tax, and at the same time save for retirement

IKZE (Individual Pension Security Account) is a special retirement account that allows you to voluntarily save for the future and at the same time benefit from current tax breaks.

What is IKZE?

Each year, contributions to IKZE can be deducted from the personal income tax (PIT) tax base. As a result, we will pay lower tax for a given tax year. Moreover, the larger the annual sums allocated to IKZE, the greater the tax relief.

IKZE is a solution included in the third pillar of the pension system. It is an additional and voluntary way of collecting funds for the future. Apart from the fact that it allows you to multiply your money for retirement, it also provides benefits “here and now”, specifically at the time of settling your income tax. As we said, IKZE contributions are deductible from the tax base, so we will pay lower tax. To take advantage of this preference, the account owner must make a deposit in the year that will then be subject to settlement. In order for the contribution to be deducted from income tax for 2024, it must be recorded by December 31 this year. For this purpose, you must submit an additional PIT-0 form and enter the amount of payments for the ended year.

Lower PIT. How much can you gain from IKZE?

The amount of the deduction depends on the payment made in a given year. However, there is no full freedom here: there are top-down payment limits set at 1.2 times the average monthly salary in the national economy forecast for a given year. In 2024, it is PLN 9,388.80, and for entrepreneurs running JDG – PLN 14,083.20.

How much nominal tax can we save by saving in IKZE? It depends on how much we have paid, how and at what rate our income is taxed. In 2024, due to payments to IKZE, we can reduce personal income tax by up to PLN 3,004 (variant in the case of the maximum amount of payments to IKZE and taxation at a rate of 32% from the first month of generating income). For self-employed people, the maximum amount of tax benefit is PLN 4,507 (taxed at 32%).

What does IKZE give you?

IKZE is one of the ways to save for retirement. IKZE may be kept in the form of a bank deposit, in the form of investment fund units, or in the form of investment or pension accounts. In the case of IKZE in the form of a deposit, the interest rate is known in advance, but it will not be particularly competitive with deposits. IKZE based on investment funds provides a higher profit.

IKZE offers vary, companies may have more or less aggressive packages, as well as packages tailored to multiple owners. If it is a young person, the manager can afford to invest more aggressively. Closer to the owner’s retirement, the fund portfolio switches to a relaxed allocation. It is impossible to clearly assess which offer is the most advantageous, because it depends on what is important to a specific saver. Some are not discouraged by the risk, others are ready to earn less so as not to be nervous about the financial results achieved by the fund. What all these account types have in common is the ability to deduct contributions from tax.

Withdrawal of funds from IKZE

Payment of the accumulated capital may take place in 2 cases:

• after reaching the age of 65, provided that payments to IKZE have been made for at least 5 calendar years

• at the request of the authorized person in the event of the death of the account holder

If the account owner does not live to see the withdrawal, the accumulated money will not be lost. In the application, he may indicate the person authorized to manage funds in the event of death.

Disadvantages of IKZE

When withdrawing money, 10% will be deducted. flat-rate tax on profits (you must meet the conditions mentioned above, i.e. be over 65 years old and pay the money for at least 5 years). However, this is less than 19 percent. “typical” capital gains tax.

Account inheritance is also covered by 10%. tax.

For some, the disadvantage will be limits on the amount of premium that can be paid in a calendar year.

How can I set up an IKZE?

Some investment fund companies, brokerage houses, insurance companies and banks offer IKZE. We are not welded to the institution that manages our account for years. The accumulated funds can be transferred to another institution, but if such a decision is made before 12 months from the conclusion of the contract, it will involve an additional fee. Subsequent transfer is free of charge. One person can only have one IKZE.

The minimum deposit amount for IKZE is PLN 100, and the maximum amount is set every year. Payments can be made once a year or at shorter intervals. There is no obligation to make payments throughout the entire period from establishment to age 65, but due to tax deductions, it is worth making payments in at least five calendar years.