The Brazilian retirement income system scored 55.8 on the 2022 Mercer CFA Institute Global Pension Index and a C grade in overall index value after evaluating the retirement income system’s adequacy, sustainability, and integrity. Even though the system has some good features, it has major risks and shortcomings that should be addressed, without which its efficacy and long-term sustainability can be questioned. Brazil’s retirement income comprises a pay-as-you-go social security system and voluntary occupational corporate and individual pension plans.
National Level
There are multiple national pension schemes in Brazil. The main one is Regime Geral de Previdência Social (RGPS), a public, mandatory, pay-as-you-go scheme operated by the National Social Security Institute that covers all private sector workers. It is financed through payroll taxes, shared by the employer and the employee, and revenues from sales taxes and federal transfers that cover shortfalls of the system. Legislation enacted in October 2019 sets the minimum retirement age to 65 for men and 62 for women. The required length of contribution into the system remains 15 years for both women and men who started working before the October 2019 reforms were approved. For those who start working after that date, the minimum length of contributions will remain 15 years for women and increase to 20 years for men. Employee contributions will range from 7.5% to 11.69% based on their level of income.
Regimes Próprios de Previdência Social is a separate system for civil servants.
Previdencia Rural is another benefit, equal to minimum wage, for men age 60 and women age 55 or older who have completed at least 180 months of work in rural areas.
Brazil has high pension benefits relative to working-age incomes. According to the constitution, the minimum pension cannot be lower than the minimum wage. This has led to increases in the minimum pension of almost 90% over the last 10 years, even when adjusted for inflation. Two-thirds of pensioners receive the minimum benefit equal to the minimum wage, at a significant fiscal cost.
Occupational & Individual Level
The Regime de Previdência Complementar (RPC) is a voluntary private pension system that provides funded occupational employee and individual private schemes. Employers have several options regarding the scheme they offer their employees. They can establish and sponsor their own occupational pension funds, participate in existing multi-sponsored pension funds, make contributions to associative pension funds, or contract out the provision of an employee scheme. Employees can both participate in the plan (or plans) offered by their employer and take out an individual pension plan if they desire. The majority of occupational pensions are defined benefit, although many are defined contribution or a mix of the two. The diversity and complexity of the market increases competitiveness, diminishes costs, and lowers both systemic and individual risks.
Summary Sources
Adghirni, Samy and Fagundes, Murilo. “Brazil Passes Flagship Pension Reform to Shore Up Finances.” Bloomberg. October 23, 2019. Accessed 01/22/2020.
BBC News. “Brazil pensions: Victory for Jair Bolsonaro as reform passes” October 24, 2019. Accessed 01/22/2020.
Brazil Institute. “What’s Happening with Pension Reform in Brazil?” Wilson Center. October 22, 2019. Accessed 01/22/2020.
Mercer. “Adapting Your Organization To The Social Security Reform.” October 2019. Accessed 01/22/2020.
OECD. “Pension Reform in Brazil.” April 2017. Accessed 01/22/2020.
OECD. “Pensions at a glance 2019: Country Profiles- Brazil.” Accessed 01/22/2020.
Social Security Administration. “Social Security Programs Throughout the World: the Americas, 2019 (Brazil).” March 2020. Accessed 01/22/2020.
Current Issues
To alleviate the financial burden from the COVID-19 pandemic, Brazil decided to institute temporary reforms to many of its economic policies, including its pension plans. Mainly in effect for the duration of 2020, the first relief policy included bringing forward the 13th pension payment to retirees to encourage spending and stimulate the economy. Brazil also extended the payment deadlines for employer social security contributions from May 2020 to November 2020 and temporarily decreased, until 06/30/2020, the rates of contributions to autonomous social services (ranging from 0.05% – 1.25%).
Summary Sources
“Policy Responses to COVID-19.” International Monetary Fund. Last updated June 10, 2021. Accessed 06/22/2021.
“Brazil and COVID-19: New Provisional Measures.” Rödl and Partner. April 7, 2020. Accessed 06/22/2021.
“Brazil Government and Institution Measures in Response to COVID-19.” KPMG. Last updated September 9, 2020. Accessed 06/22/2021.
Last Updated 3/23/22
Source: Georgetown University’s Center for Retirement Initiatives