The term "DIP" (Czech abbreviation) has been thrown around a lot in the media in recent months. Today, we'll take a look at what it is and whether it's worth taking advantage of.

What is a DIP?

It's not so much a specific product, but the ability to use tools other than supplementary pension savings or life insurance to save for tax. These can be investments in shares, bonds or funds and it's up to the investment company to decide whether they will allow you to put the product into a DIP scheme.

What does it mean to include a contract in a DIP scheme?

Inclusion in the DIP scheme gives you the opportunity to take advantage of tax benefits on the contract, up to CZK 48,000 per year in the form of a tax deductible item. At the same time, your employer can also contribute up to CZK 50,000 per year to this contract as part of company benefits. However, these limits are common for DIP, supplementary pension savings and life insurance! Therefore, if you are already using tax benefits to the maximum extent, you will no longer be able to apply them to DIP contracts.

What are the DIP rules?

A DIP is an alternative to other retirement savings products, so there are certain rules you need to follow to avoid losing tax relief. The contract must be in the DIP scheme for at least 10 years, and the earliest you can withdraw money is age 60. If you break at least one of these rules, you have to pay back the tax relief.

What exactly does withdrawing money from the DIP mean?

It is possible to have a contract in a DIP, for example in investment funds or life cycle schemes, so you need to be wary of possible breaches of the withdrawal condition. Funds held can be sold and cash can be held within an investment account, or transferred from one fund to another, but no withdrawals can be made to your account.

Can existing contracts be added to the DIP?

This depends on the investment company in question. But according to current information, it is usually possible. The question is whether it's worthwhile for you. You always need to check this individually and evaluate whether to add an existing contract to the DIP or create a new contract that will be included in the DIP.

Since when does the 10-year DIP condition count?

The 10 year period starts when the contract is placed in the DIP scheme, so even if you have had an investment contract for 5 years, for example, and you now place it in the DIP scheme, you will have to wait at least another 10 years before the money can be withdrawn without having to repay the tax relief.

Who is the DIP for?

The main advantage of a DIP is the tax relief, so it is worthwhile for those who do not currently take advantage of tax deductions for PPS or life assurance and want to save for their old age.

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