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The pension reform proposal that Jair Bolsonaro intends to send to Congress in February should include the replacement of the current system with a capitalization model – in which every worker makes its own savings, which is deposited in an individual account. According to the Minister of Economy, Paulo Guedes, change is a way to protect future generations .
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Capitalization, however, is not the subject of consensus among experts. According to Jane Berwanger, director of IBDP (Brazilian Institute of Social Security Law), the capitalization model does not work. She cites the case of Chile, where it was implanted and is modeled by Guedes. The pensions paid today represent 30% of what was earned before the implementation of the model.
In Chile, instead of contributing to the government, the worker pays part of the salary to an AFP (pension fund administrator), who manages the resources until retirement. "If the fund misuses the money, the loss is borne by the insured." There is no guarantee of minimum value, "said Berwanger.
The Bolsonaro team has not yet specified how it works.the new model.According to experts heard by [19459004UOL the proposal would have the condition of filling the gap in social security but there would also be the risk of paying only very low pensions.
What are the advantages and disadvantages of capitalization?
The transformation of pension plans into a capitalization system could fill the gap in the long term, each worker receiving according to Carlos Heitor Campani, professor at the university. 39; Coppead University Institute of Administration at the Federal University of Rio de Janeiro (UFRJ)
However, in the short term, the cost of retirement of those who are in the system today. "I did a math there at a year and a half, and the cost of this transition would be the size of a Brazilian GDP [Produto Interno Bruto]. It is as if, in one year of work, all the wealth generated by Brazil was used only to finance the pension system, "he said.
Another problem would be the Low value pensions. "In Brazil, many rural and informal workers do not have a regular income. It may be that they reach retirement age and that they do not have enough money to support themselves, "said Kaizô Beltrão, a professor at the University of California. Brazilian School of Public Administration.
Without the details of Paulo Guedes' proposal, the experts said that it was difficult to give an opinion on the evolution of the protection regime The consensus among them is that a day-to-day change would have a huge impact on public accounts and users, so the transition should take a few years.
What will happen next? of those who are already in the system today? Will the capitalization be valid only for those who will still enter the market? According to Beltrão, the capitalization could only be valid for those who are going to still enter the market, as long as the government has to respond to the proposal.
Kaiz Beltrão professor at FGV-Rio
anyone active contribute to both systems simultaneously. "In this case, care should be taken not to overload the worker," he said.
Another possibility, according to Professor FGV-Rio, would be for active workers to migrate to the capitalization plan. The amount and duration of their contribution to the current system would be taken into account and they would receive a pension-related pension, as well as money from individual accounts.
And who has already retired?
Among those who are already retired, it would not be possible to change the rules, according to experts. With active workers receiving their own pensions, it would be up to the government to reap the benefits of seniors. The problem is that public accounts are in the red and that there would be no way to cover this expense.
A possible source of funding for this purpose would be the issuance of long-term public bonds, according to Campani, UFRJ. Even if this measure increased the public debt, it would be welcomed by the market because it would empty the coffers of the government. "It's different to ask for money for expenses that will not yield – the government would invest," he said. . Indeed, the number of pensioners is increasing and the gap is widening. A mixed model, presenting the characteristics of the two pension systems, could be an option. Chile, for example, has moved in this direction.
I consider it possible a distribution system for the poorest population and a system of capitalization for those who can contribute more.
Carlos Heitor Campani, professor at the Coppead Institute / UFRJ
According to Campani, the government should fund a minimum amount for the poorest. According to the professor, the choice of diet could be made by the worker when entering the market or according to his range.
salary. In both cases, there should be a minimum age for retirement. "In the capitalization, since the money comes from the worker himself, there might be more flexible rules and a lower minimum age, but the one who retires earlier would receive less," Campani said. .
