So maybe the hottest topic of the moment in Brazil is our pension system and how to reform it. We’ve been covering it quite extensively, but these two posts may best capture the whole context. A very brief TL;DR: we currently have a system in which young workers pay the pension of retired workers, and we’re now going through a demographic change. As life expectancy rises and birth rates fall, we get fewer young people to sustain the pension of retirees, and so on. That, along with bountiful privileges to military, judiciary elite, and public service elite, puts our pension system at risk, and the current system is taking each day more and more of our public finances.
And now our new government has just officially submitted their proposals for a reform. It still has to go through our Chamber of Deputies and our Senate, and it’s highly unlikely to pass without changes. Either way, these are the initial ideas, and they’re neatly summarized in these infographics we translated up there.
Now, to some of the main controversies (pointed and explained more deeply here, from where we summarized and translated the following points):
First, the pension for the Military isn’t included in this initial bill. That is an issue, because (remember we mentioned pountiful privileges?) the military weigh 16 times more on our pension deficit than the civil worker. According to our government, a separate draft is being made for them. But then, like, half of the current government is military, so one can wonder about how their changes will compare to everyone else’s.
Second, there are controversial changes to the Benefit Of Continuous Provision. Under the current system, people 65+ years old on with family income up to ¼ minimum wage per capita (which would ammount to US$66.67, currently) are entitled to a full minimum wage per month (currently: R$998, ~US$266.24). Under the proposed system, only people over 70 years old would be entitled to the full wage, whereas people 65-69 years old would get R$400 (~US$106.71). Given that said R$400 is not indexed, not even bound to be adjusted for inflation, it runs much risk of depreciation, becoming less reliable.
It gets especially tricky with one more criticism: our informal work sector is, like, *huge*. About half of the country’s workers are informal, thus not contributing to the pension, and, as you may have noticed in the infographics, they are not included in the bill. A requirement of longer period of contribution added to the lowered reliability and accessibility of the Benefit Of Continuous Provision would take a heavy toll on poorer people.
Also, the bill has two measures to reduce the cost of workers to employers. One is to end the termination fine (currently 40% of their Severance Indemnity Fund, a fund for workers), making it cheaper to fire retired people who are still working. Currently, a retired employee who is still working can cash out the whole fund, and the employer, should they send them away, is still required to pay that termination fine, as indemnification. That fine usually adds up to a significant amount for people who’ve been working 20, 30 years in the same company. Another measure is the end of the obligation of companies to collect the equivalent of 8% of the salary of employees for the Severance Indemnity Fund for retired employees. This measure would automatically lower the wage of retired workers who remain active in the formal sector.
Another measure is to make the pension by death in the public sector equal to the one in the private sector. That measure also introduces another calculation to said pension, which would probably reduce its values. Under the current system, the widow from the private sector is allowed the full equivalent of their spouse’s benefit, while the one from the public sector is entitled to 100% of the benefit up until the ceiling of our Social Security Institute (around R$5,800, ~US$1,547.30) + 70% of what passes this value. With the change, widows from both sectors would be entitled to 50% of their spouse’s benefit and 10% more for each dependent relative, up until 100% of the general regime. This could lead to pensions lower than a minimum salary. Also, in case of accumulation of benefits, the person would have to pick the highest and receive only a percentage of the other(s). Right now, they’re allowed to earn the full value of each of them. Women could be more affected by the change, since they form most of the people who earn pensions.
At last (for now), the bill proposes progressive rates of social security contributions, both for public and private workers. Under the current rule, the contributors pay from 8% to 11% of their salary for social security. The proposal would create new categories (which are shown in one of the infographics up here) and, resumingly, would lower the aliquot for lower wages and raise it for higher ones (aka, people with lower salaries would pay less, and people with higher ones would pay more). This would hit an elite of public services that earn over R$39k (~US$10.4k), who would pay a 22% aliquot, while they today pay 11%. Pretty much, it would result in reduction of the net salary for civil servants with that higher remuneration. While this is probably seen very positively by average citizens and economists alike, it will probably suffer resistance by that elite of public servers.
Now we wait for the next chapters. Hope this helped your information and understanding of the topic!
And shout out to @schwrzenegger and @ghostofawolf300 for helping translate the infographics! Thank you so much, you precious souls <3
