Accumulation plan (PAC) – What is it, definition and concept | 2022

An accumulation plan (PAC) is a strategy that can be applied when purchasing an investment or savings product. It consists of making periodic contributions over time in order to accumulate high-value capital.

That is, the accumulation plan is a way to invest or save. It is characterized in that regular disbursements are made to a fund that grows larger over several years.

For example, the investor can apply this method when investing in a mutual investment fund. Thus, he makes monthly contributions to a capital that is being managed by a third party who, in turn, will invest it in other securities such as bonds, shares, etc.

The money accumulated through this investment fund can be directed to different types of investments, such as the purchase of a property, paying for the children’s university, etc.

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Also, this strategy can be used to build a retirement savings fund. This, making a periodic contribution to an insured. Once the person retires, he will receive a pension from the accumulated fund.

Advantages and disadvantages of the accumulation plan (PAC)

Among the advantages of the accumulation plan we can find:

  • It can be adapted to a small investor who cannot make a large investment ‘at once’.
  • The contributor can increase his investment in certain periods, for example, if he begins to receive higher income, or if he wishes to increase his investment in a certain asset(s) taking advantage of a situation in which its price has fallen.
  • In line with the previous point, the investor can reduce his periodic contribution if his income is reduced or if he seeks to reduce his investment in an asset because its price has risen.
  • Allows portfolio diversification. This, in view of the fact that the accumulated fund can be invested in different fixed or variable income assets, as we explained in the case of mutual funds.
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Also, this strategy can have some disadvantages:

  • It is a medium or long term strategy. This is because the assets in which the fund invests may show increases or decreases in the short term. So, to safely observe an attractive return, higher on average than that of a savings bank account, for example, it is necessary to invest for several years.
  • Continuing with the previous point, the investor could be stressed or frustrated if he is not willing to ‘forget’ his money for several years, before being able to recover it.
  • It requires the person to contribute in a disciplined way, for example, every month. This can be more demanding in the case of people who do not have a regular income stream, for example, those who are self-employed.

Example

An insurance company offers an accumulation plan so that people can generate a fund for a future pension to help them in old age.


The PAC requires a monthly contribution of 500 euros. In addition, it is estimated that on average a return of 5% per year will be generated. This, taking into account that the recommendation for the user is to make at least continuous contributions for ten years.

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