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BRASÍLIA – The economic team is studying that, as part of the social security reform, the transition to the minimum age of retirement takes place in 15 years. The idea would be an intermediate solution between those proposed to the government. It would be shorter and harder than the text sent under the Michel Temer government to Congress, which envisioned a transition in 20 years, and sweeter than the proposal to make the change in just ten years, which is also badessed. This measure would generate additional savings of R120 billion over the project presented to the House. In total, the Temer reform provides relief of about 500 billion rand in ten years.
Another possibility under consideration, according to an interlocutor of the economic team, is that at the end of this 15-year transition, the minimum age will be lower than that stipulated in the Congress proposal, namely 65 years for men and women. 62 for women. That could be 62 for men and 57 for women, for example, as President Jair Bolsonaro said in an interview with SBT earlier this month.
– The creation of the minimum age is much more important than the defined age level – said this source.
The discussion on the transition period was one of the themes of a meeting held in Rio last Friday, between the Minister of Economy, Paulo Guedes, the Secretary for Social Security , Rogério Marinho, and economic advisers. The transition time is what defines when the minimum stipulated age will actually be applied. For example, in Temer's 20 years of transition, it would only be 65 (men) and 62 (women) required by the proposal in 2038.
Before that, it would be possible to retire earlier, at an age calculated from a transition table. The shorter the transition period, the more difficult the reform.
Very High Requirement
The evaluation of the experts who took part in the sixth meeting revealed that a very short transition period may be difficult to implement because the beginning of the transition would have to begin already at a very advanced age, is about to retire for the contribution period.
The additional savings of R $ 120 billion represent less than half of what is expected of a faster, ten-year transition, estimated at R $ 275 billion.
The shortest transition period is part of the proposal presented by economists Arminio Fraga, former president of the Central Bank, and Paulo Tafner, pension specialist. In the project, presented to the Guedes team shortly after the elections, the minimum age would be 55 for men and 53 for women, reaching 65 years old in 12 years.
The meeting also focused on the migration to capitalization regime, which should be part of the proposed reform of the new government. In this system, which will target only future generations, a portion of social security contributions will go to the account of an individual worker, which will allow him to pay his benefits in the future. Today, it only contributes to the distribution system, which is a cake that finances the pensions of all.
FGTS in Capitalization
The idea of capitalization in the study is to allow some of the money from the FGTS to be transferred to this individual account to fatten retirement savings. However, it is estimated that the measure could be resisted as the Fund's resources are used to finance various activities, such as mortgage lending.
It is expected that the pension reform project will be presented to President Jair Bolsonaro later this week. The idea of the economic team is that the government can already present the outline of the project at the World Economic Forum in Davos, Switzerland, which will take place next week.
Upon reading the members of the economic team, the public forum – mainly investors – should bill concrete proposals. The fate of pension reform is important for financial market agents because it is directly related to the health of the country's public accounts.
An imbalanced system increases the risk that the government will have difficulty honoring the payment of debt. This year alone, the social security deficit is expected to reach 218 billion rubles, or 2.9% of GDP. If nothing changes, this percentage should rise to 11.4% of GDP in 2060, according to the projections of the economic teams.
Another means envisaged by the government is to finance the transition to a system of distribution, in which active workers take advantage of retirees, in a system of capitalization (each contributing to their contribution. Last week, the special secretary in charge of Social Security and Labor, Rogério Marinho, has been up to the point that regime change would require a resource fund to play the transition:
– For it (capitalization) to be in a vertical position, a transition fund is needed. This is also under development.
However, the government's challenge is to put into practice a privatization program that raises enough resources for this function, as the Minister of Economy, Paulo Guedes, also wants the proceeds from the sale of 39, state-owned enterprises be used. reduce the stock of public debt.
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