February 6, 2023

What is the FGTS withdrawal that Lula’s government wants to end?

The new Minister of Labor and Employment, Luiz Marinho (PT), has stated that the government of Luiz Inacio Lula da Silva (PT) will end the anniversary method of withdrawing the Time of Service Guarantee (FGTS) Fund. Marino said in an interview with the newspaper the scientist, On Wednesday (4), that the intention is to save the fund’s social protection nature for those who have lost their jobs.

The next day, Marinho returned and stated on Twitter that the method would be “a subject of wide discussion” between the FGTS board of trustees and union centers. “What we care about is protecting male and female workers in the event of dismissal, while preserving their savings.”

Marinho was in charge of the ministry from 2005 to 2007, between Lula’s first and second governments. Batista says, in his new administration, The priorities will be job creation, promotion of the minimum wage and the use of FGTS as an investment vehicle.

FGTS is one of the main rights guaranteed to workers by formal contract, created to provide financial stability to those hired under the Labor Standardization (CLT) laws. The fund is made up of deposits from employers and is the resource most used by Brazilians who want to realize their dream of owning a home.

Continue after the announcement

The Christmas withdrawal was created by the government of Jair Bolsonaro (PL) in 2020, and the worker is allowed to withdraw from 5% to 50% of the FGTS every year, in the month of his birthday. The percentage that can be withdrawn varies depending on the amount accumulated in the fund (see video below).

Since the withdrawal took effect, 28 million workers have joined the method and withdrawn R$34 billion from FGTS (R$12 billion annually, on average, is withdrawn from the fund).

Read also
• FGTS: What is it, how does it work and how to opt out

It is not always helpful

Joining the Christmas Draw is optional and should be carefully evaluated, as those who choose this method cannot withdraw all funds from the fund in the event of dismissal without valid reason. In addition, anyone applying to join the Caixa Econômica Federal only reverts to the “normal” method (termination of withdrawal) two years after the application has been formalized.

A Christmas withdrawal prevents withdrawing money in the event of a dismissal, but it does not prevent all other preconditions for accessing the money, such as financing your home or withdrawing it after three years of inactivity or a serious illness.

Continue after the announcement

When he announced the withdrawal rules at Christmas, the then Minister of the Economy, Paulo Guedes, said that this method allows the worker to receive an “extra salary” every year. But it is not always beneficial to choose this rule.

Experts argue that the more credit a worker puts into the box, the less interesting the Christmas draw becomes. This is because the percentage paid annually decreases according to the table below:

FGTS Birthday Withdrawal Rules
account balance Aliquot extra premium
Up to 500.00 BRL 50% 0
From 500.01 Brazilian Real to 1,000.00 Brazilian Real 40% 50 Brazilian reals
From 1,000.01 BRL to 5,000.00 BRL 30% 150 Brazilian reals
From 5000.01 Brazilian Real to 10000.00 Brazilian Real 20% 650 Brazilian reals
10000.01 Brazilian Real to 15000 Brazilian Real 15% 1150 Brazilian Real
From 15,000 R$ to 20,000 R$ 10% 1900 Brazilian Real
More than 20,000.01 Brazilian reals 5% 2900 Brazilian Real

That is: a person with R$21,000 in FGTS can withdraw R$3,950 as the “14th salary” every year. It is not an insignificant amount, but before you decide to recover it, you need to consider unforeseen circumstances such as dismissal without just cause, where you will not be able to withdraw the remaining amount from the fund.

In this example, the dismissed person cannot withdraw the R$21,000, only the fine paid by the employer (40% of the amount deposited in the FGTS). You will continue to receive payments each year, plus the R$8,400 FGTS fine and other rights for those who are fired (advance notice, pro rata leave, etc.).

When is it worth it?

When a worker has a financial cushion, to deal with layoffs or other unforeseen events, he or she can consider withdrawing Christmas money to invest the money. This is because FGTS yields very little: 3% per annum plus Reference price (TR)while Selic is at 13.75% annually (and shouldn’t be going down anytime soon).

The distribution of FGTS dividends to shareholders, which has been implemented in recent years, has slightly improved profitability. In 2021, the fund’s return was 5.83% and it outpaced savings (2.99%), but lagged far behind inflation (10.06%).. In 2020, the FGTS gain was 4.92% (vs. 4.52% for the IPCA).

It may also be beneficial to join the method when the worker has debts and wants to pay them off. This is because it is almost impossible to find investments with returns that exceed loan interest rates.