Newly elected Brazilian President Jair Bolsonaro has announced changes to Brazil's pension system. Most notably, the reform would set the minimum pension collection age at 65 for men and 62 for women. The proposal is being sent to Congress for approval as a constitutional amendment, which means the approval process will take time.
An economic team comprising Rogério Simonetti Marinho, Brazil's Social Security Secretary, Paulo Guedes, Minister of the Economy, Onyx Lorenzoni, Chief of Staff, and Carlos Alberto dos Santos Cruz, Government Secretary, met with Bolsonaro to finalize the proposal on February 14.
Pension reform has been an issue in Brazilian politics over the last few years. Former President Michel Temer declared that the pension system, particularly for public employees, was bloated and in desperate need of reform. However, his efforts to implement changes failed to garner sufficient political support.
Brazil has one of the world's most generous pension systems. Currently, 13 percent of GDP is spent on social security, while the average for G-20 countries is 8 percent. High pension payouts coupled with a rapidly aging population spells trouble for a country still struggling to recover from a debilitating economic crisis. By 2060, retirees will account for 25.5 percent of Brazil's population, as compared to 9.5 percent this year.
The hope is that overhauling the pension system will help the government save money; that is, approximately one trillion reals over 10 to 15 years. The new system will work like individual savings accounts, making workers responsible for their earnings.
One issue that the economic reform team struggled to agree on was the minimum age. The team wanted both men and women to earn their pensions at 65, whereas the president wanted women to earn their pensions at 60. The compromise on the final proposal was that women would get pension rights at 62.
Another issue that caused debate among the economic reform team was when the new pension rules would go into effect. While the team proposed that they would go into effect after ten years, Bolsonaro proposed a twenty-year transition period to implement the new system. The compromise was twelve years.
The constitutional amendment will now go before two lower house commissions and then to the floor. After that, it will need the support of a majority of deputies in two separate votes before being put before the Senate, where it will again require a majority in two separate votes. If Bolsonaro's team garners enough support, approval could come as soon as June for the lower house and August for the Senate.