With the arrival of the new year, a new strategy has been launched on how Czechs can secure themselves financially in old age with state support. From January 1, 2024, the Long Term Investment Product (DIP) is here and its aim is to introduce such tax breaks to convince people not to be afraid of investing and take care of their old age in their own hands.
Simply put: DIP is an investment product where you invest in stocks, bonds or mutual funds. In essence, something similar to what you already have, if you have taken out a supplementary pension fund, or if you pay for investment life insurance, or if you invest in funds from your bank. But the DIP significantly expands the possibilities in which you can invest to benefit from tax relief.
DIP is therefore a collective name for new and existing financial products, which allow the creation of savings for old age and what they can now offer you:
- bank,
- savings and credit cooperatives,
- stockbrokers,
- self-managed investment funds,
- foreign people with similar activities,
while all these listed entities must have a license from the Czech National Bank, which authorizes them to provide these investment or savings products in the Czech Republic.
Will you create a long-term investment product (DIP)?
So in some cases you already have a DIP and all you have to do now is move to a new regime that will allow you to benefit from tax benefits: this is the meaning of all this news, introduced at the beginning of the year by a law that amends some laws in relation to the development of the financial market and the support of old age provision.
How does DIP differ from the classic “penzijk”?
- In the context of supplementary pension insurance (in transformed funds) or supplementary pension savings, it is possible to invest only in participation funds offered by the respective pension company. You have no control over how the pension company handles your invested money. In DIP, however, you can set investments at your discretion and you can change the composition of investments as you prefer over time.
- From this year you can have both your existing supplementary pension (PP) or supplementary pension savings (DPS), and a DIP, or even multiple DIPs with different companies.
- However, it is not possible to transfer supplementary retirement savings into a long-term investment product. You should just end the “pension” and put the money in a new DIP, but we advise against doing this, because if you end the pension early you will have to pay back the state contributions, and you would still have to tax 15% on your own contributions, employer contributions and a share of the income.
When the time comes when you can withdraw your money from the DIP (you must be at least 60 years old and the investment must last at least 10 years), then you can withdraw it either in a lump sum or gradually, tax-free and you can also continue investing.
Tax benefits and DIP rules
- You can deduct it from your tax base every year up to a total of 48,000 Czech crowns per tax period. This will save you up to a year on taxes 7200 Czech crowns.
- Your employer can contribute to your DIP (just as in the case of “penzijka” or “life pension”). The employer may include these contributions as tax-advantaged products for the employee’s retirement, up to 50,000 Czech crowns annually.
- This means you will get maximum tax support from the state when you submit to the DIP 4000 Czech crowns. Money invested above this amount will no longer be discounted. The employer will be entitled to tax relief for contributions of a similar amount, 4127 Czech crowns.
Conditions for tax benefits
- The investment in DIP must last at least 120 months (10 years),
- you can cancel it at the earliest in the calendar year in which you reach the age of 60.
- If you fail to comply with these two conditions and cancel the DIP, you will have to repay all tax benefits received during the investment period.
It is important to note here that although the DIP may essentially be your existing product that you have been sending money to for many years, only from this year does the mandatory 10-year period for tax deductibility count.
The period before January 1, 2024 is not included in the duration of the long-term investment product, because before that date it was not possible to conclude a contract for this product, confirms Ministry of Finance spokesperson Gabriela Krušinová.
For this reason it is necessary to “exchange” your existing investments for a new contract starting from this year and with new conditions. In order to claim DIP on your tax return, you will need confirmation of your deposit amount after the end of the calendar year, similar to what pension funds or insurance companies send you every year. You will then receive the first confirmation of your investment in the DIP at the beginning of 2025.
If you have been investing for a while, you can also use an existing contract in which you have already paid an entry fee for a certain target amount of regular investment. However, it is important to think in advance whether it is appropriate to allocate part of the money already invested from the existing contract to another contract that does not have a time limit, so as not to reduce liquidity.
Already from the beginning of 2024, Měšec.cz asked the five largest Czech banks (in terms of turnover or number of customers) and well-known investment companies how they are dealing with DIP at the moment and what they can offer to those who are seriously interested in old age insurance. Enthusiasts who would like to organize a DIP already at the beginning of the year, we need to calm down a little. Most banks are just preparing for its launch and at the moment you will have more success with investment companies.
DIP a banker
Czech Savings Bank
We assume that we will offer our customers the option to open a DIP product in the first quarter of 2024. Communication will be personalized primarily within the George mobile banking system, but also as part of direct communication between our banking advisors and customers , says Spořka spokesperson Filip Hrubý.
Commercial Bank (KB)
“Komerčka” is also still preparing its DIP.
Yes, we perceive this product as another option for customers who think about the financial security of their life in the long term, responds bank spokeswoman Šárka Nevoralová when asked if they are preparing new things for customers in the DIP sector. We want to offer the product in the first quarter of this year. We are also preparing a regular investment program that best meets the objectives of a long-term investment product, she adds.
Czechoslovak Commercial Bank (ČSOB)
ČSOB has been offering DIP since January 2, 2024. It called its product simply “DIP” (contractual and commercial conditions) and it is not yet possible to order it online, but you have to order it at a branch. On their website they report that if you are already an existing investor and have the necessary valid documents, creating a DIP account will be a matter of time.
If you have never invested with ČSOB, we recommend that you immediately negotiate an investment services contract and complete an investment questionnaire. The banker will also introduce you to the investment portal, in which you will make all your investments, writes ČSOB.
In practice, it appears that the bank will set you up with a long-term investment product (DIP) account, which is free. You send money to this account (your employer also sends contributions here) and invest from there. The fees arising from the investments themselves are the same as for investments in other investment instruments.
However, you can start investing in DIPs completely online at the company Homeland Finance, which is a “daughter” of the ČSOB group. Log in using your banking identity or take a photo of your identity documents, activate your account and you can start investing.
COIN Money Bank (MMB)
MMB will launch DIP in early February.
Among all our investment products in Czech currency the client will be able to choose the DIP in which he can invest from his savings account, which will become part of the DIP structure, says MMB spokesperson Zuzana Filipová.
At the moment the bank is still testing its DIP and will launch an information campaign as soon as it can be used.
Raiffeisen Bank
With Raiffka you can invest in a DIP from 1 January 2024, you can access it from the bank’s website, where you will find out which specific products you can start investing in. As part of the DIP, the bank will automatically open foreign currency accounts in euros and US dollars in addition to the crown account. The lowest deposit you can send to DIP is 100 CZK.
To start investing, you must first download the mobile investing application. If the bank already knows you, it will only connect this application to your existing mobile banking, otherwise it will ask you to upload your personal documents. Then you just need to fill out the investment questionnaire and sign the contract on your mobile.
Under the DIP, selected investment instruments are completely exempt from subscription and management fees. There are also reduced transaction fees and completely abolished minimum transaction fees for all investment instruments.
At the same time, Raiffeisenbank automatically and free of charge opens cash accounts for clients not only in CZK, but also in EUR and USD. Clients can then invest directly in the currency of the instrument in question. It also offers customers a preferential interest rate of 5% per annum on cash accounts in Czech crowns up to the maximum tax-deductible annual deposit, i.e. 48,000 Czech crowns, explains bank spokeswoman Tereza Kaiseršotová.
J&T Bank
Although it is smaller in terms of number of customers and profits, we include this bank in our survey because it deals exclusively with investments. However, it is also preparing to launch investments in the DIP scheme.
Of course we will offer existing and new customers the creation of a long-term investment product, we plan to launch DIP at the end of the first quarter of this year. We will offer customers a wide range of our funds and bonds and will gradually expand the DIP offering, says Monika Veselá, PR manager at J&T Banka. We will now focus actively on the topic of DIP and will look into it further, especially in communication with customers. We will inform you that it is possible to establish this with us and what this entails, she adds.
How are investment companies prepared for the DIP?
Generali Investments CEE
You can start investing with this company, you can find the range of products on the Generali Investments website.
Under DIP, we offer a new class for most of our funds: from dynamic to mixed to conservative and with fee relief. We have been allowing Generali Investments clients to take out DIPs since the beginning of the year, and over the course of the year we want to further expand the range of DIP products and services and make it even more attractive, says Marek Beneš, the company’s chief financial officer. director.
Amundi Czech Republic, an investment company
Amundi plans to launch the DIP in the first half of 2024.
Our long-term investment product (DIP) allows clients to choose from hundreds of investment instruments, including popular and highly rated actively managed investment funds, as well as indexed and low-cost investment instruments. Of course, there will also be an accompanying service that includes periodic reporting in Internet applications and account statements, including confirmation for tax purposes, says Jan Chlumský, marketing director of Amundi Czech Republic.
WOOD & Company (Porto)
WOOD & Company’s Portu platform is already in full swing with DIP. If you are already investing in the Port, just click on the “Retirement Account (DIP)” menu, accept the contractual documentation and you will be able to choose your first investment. The minimum amount you can send to DIP is CZK 500.
If you are a new customer, then you sign up, fill out an investment questionnaire, first choose which investment you want to have in your retirement account and complete the registration.
As part of Port’s long-term investment product, you do not have to limit yourself to the offering of traditional pension and participation funds. You can compose your retirement portfolio according to your wishes. You can entrust it to Porto or create your own investment strategy, for example starting from growth sectors or popular indices. Do you want to add dynamic cryptocurrencies or conservative interest-bearing cash? No problem, it works in Porto, the company says on its website.
The mention of cryptocurrencies has a strange effect, because according to the law insufficiently regulated investments, i.e. cryptocurrencies, corporate bonds and other alternative investments, do not fall under the DIP. But we will delve deeper into this topic in one of the next articles.
To melt
Furthermore, the Fondee platform already offers the possibility of investing in DIPs and you can choose between offering classic or ESG portfolios with a reduced commission.
We have created a new retirement investment account that acts as a DIP. Automatically invest in diversified portfolios made up of ETFs. We support investors in the Pension Investment Account (DIP) with an even lower fee than in our regular portfolios: we have reduced it to 0.5% per year, while in the pension for balanced and equity strategies you pay 1% per year for management plus a performance fee of 15% annually from profit, Fondee says on its website.
If you are already a customer, all you have to do is add your pension portfolio in the customer area and confirm your agreement with the terms and conditions in which the DIP is incorporated. You can invest starting from an amount of CZK 1,000.
Result
Conseq has all the necessary information on the site, but for the DIP device you have to wait a few more days.
We do not foresee any changes in the products, we believe that our product offering is sufficiently broad and suitable for long-term regular investments, so the only change is that the products will be registered in the DIP regime and receive the relevant tax benefits and employer contributions of work, says the director of the pension company Conseq Richard Siuda.
Negotiation of the DIP for the existing investment program will take place in the form of online conclusion of a simple contract on the inclusion of the underlying product in the DIP regime.
INVESTIKA, an investment company
We have been intensively preparing for the introduction of the DIP over the last six months and within our company we have made its use possible from 2 January 2024. As part of the DIP, we offer investments in all our products for the public, including the new investment fund EUROMONETIKA, which we also launched in early 2024, says company spokesperson Markéta Dvořáková Fišerová.
You cannot organize a DIP online yet, you must enter your contact details on the INVESTIKA website and wait for a company employee to contact you. Alternatively, if you are an existing customer, you should contact your advisor.
INVESTIKA will launch a new mobile application in the 1st quarter, through which you can invest directly in all products, even within the DIP.
CIRO
As part of the DIP we currently have a ready solution for our clients for regular investments in exchange traded funds (ETFs). We plan to further expand the range of products in which clients will be able to invest within the DIP during the year, says Anna Píchová, head of the analytical department.
At Cyrrus you can’t even organize a DIP online, you have to contact your consultant or leave a contact on the company website.
2024-01-09 01:40:41
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