Schneider S. M., Petrova T., Becker U. (eds.), Pension Maps: Visualising the Institutional Structure of Old Age Security in Europe and Beyond, 2nd ed., Munich: MPISOC, 2021.
The Brazilian Old Age Security System in 2020
The origins of the Brazilian old age pension system go back to the late XIXth century and the creation of pension schemes for certain groups working in the public sector. In 1923, the system started to also cover private sector employees, with a more encompassing system being created only in 1966. Throughout its history, the Brazilian old age pension system has been marked by a stark discrepancy in the treatment of public and private sector employees, granting certain privileges (such as higher pension benefits) only to the former. These discrepancies were partly reduced in 1998 with a constitutional amendment that introduced the possibility for public entities to limit the pensions of new entrants in the public sector to the same ceiling as for private sector employees. However, even after the last major reform of 2019, differentiated treatment for several types of workers still persists, including the onerous pension scheme for military personnel. This last reform, moreover, introduced a statutory retirement age. As of now, ‘standard protection’ in old age is guaranteed by the statutory old age pension schemes for private and public sector employees. Public pension benefits can be ‘topped up’ through voluntary insurance in complementary pension schemes, which can be either occupational or private and are incentivised through tax reliefs. A minimum level of income protection is guaranteed through the statutory pension schemes, as public pension benefits cannot fall beneath the minimum wage. Those who have no right to a pension benefit are protected through social assistance measures.
Standard Protection in Old Age
All persons working in the private sector, including the self-employed, are mandatorily insured in the statutory old age pension scheme for private sector employees(Regime Geral da Previdência Social) and must pay contributions proportional to their earnings. This pay-as-you-go (PAYG)-financed insurance scheme is by far the largest scheme and covers almost 90% of all insured individuals. In general, benefits are tied to contributions paid throughout a person's career with a specified level of minimum and maximum pension benefits. Since 2019 and the introduction of a statutory retirement age (Constitutional Amendment 103/2019), insured persons cannot retire before the statutory retirement age. However, persons working in hazardous jobs still have the right to retire 5, 10, or even 15 years earlier, depending on the degree of hazardousness of the job. Individuals not mandatorily insured in any public scheme, such as housewives or students, can join the scheme on a voluntary basis (Segurado Facultativo).
Most public sector employees are mandatorily insured in a separate scheme, the statutory old age pension scheme for public sector employees (Regime Próprio da Previdência Social). Since 1998, historical discrepancies between private and public sector employees have been gradually reduced, aligning the statutory retirement age and the calculation of pension benefits to those in the private sector, with some remaining exceptions (such as for public sector employees who started their service before 1998). Furthermore, and due to the federal structure of the state, each federative entity can institute and maintain its own system with different rules. Lastly, privileges in old age remain for police officers, firefighters, and military personnel who are insured in the old age pension scheme for military personnel (Previdência dos Militares). The scheme provides exceptionally high pension benefits equal to the last salary before retirement, and therefore imposes a substantial burden on the state’s expenses.
Public pension benefits can be ‘topped up’ by voluntary participation in occupational pension schemes (Previdência Complementar Coletiva), so-called ‘closed pension funds’ and private pension schemes (Previdência Complementar Privada), so called ‘open pension funds’. The former are usually provided to employees of a given enterprise, or of a given federative entity, as a result of negotiations with the employer and on the basis of insurance contributions provided by the enterprise or public entity. The exact circle of participants in the scheme is usually determined in a collective agreement (concluded between the employer and the trade union) or labour contract (between the employees and the employer). For public sector employees, each federative entity can institute complementary occupational pension schemes for some or all of its employees, usually doubling the amount invested by the employee. In the case of private pension schemes, individuals have the option of creating their own personal savings accounts, where they can choose between different conditions. Participation in occupational and private pension schemes is incentivised by tax reliefs if the respective pension plans have been approved by the state.
As pension benefits of the statutory old age pension schemes cannot fall below a specified minimum level equal to the minimum wage, public pension schemes guarantee a minimum level of financial protection in old age for persons who fulfil the qualifying conditions for the standard old age public pension. Those who do not qualify for any pension and suffer from material deprivation can apply for benefits from social assistance in old age (Assistência Social - Benefício de Prestação Continuada) at the minimum age of 65. The scheme is means-tested and takes into account the monthly income of the applicant and his or her family members. It is a social assistance benefit intended for elderly or invalid individuals. It is distinct from other social assistance measures as it guarantees the monthly payment of a benefit equal to the minimum wage.