The pension reform of the economic team proposes a capitalization | New

The reform bill is almost ready. The proposed constitutional amendment will set the minimum retirement age for current workers and institute a new contribution plan: capitalization.

Today, social security in Brazil for the private sector, INSS, is working on the distribution model. Employees who work contribute to the payment of retirees. Translate: Those who contribute pay the benefits of those who have retired. The money is administered by the government, which covers the deficit because it can not fail to pay anyone. The diamond in 2019 is expected to reach 218 billion rubles.

This system would continue to exist with stricter rules for retirement, which would require more time to contribute.

The capitalization will only be valid for those who will still enter the labor market. Every worker helps to pay for retirement in the future because private pension funds are already working. A kind of compulsory savings, the money being invested individually.

Experts say that the big problem with the distribution system today is the aging of the population. The number of older people in relation to the number of active workers, who support the current system, tends to increase. So the government wants capitalization, which will have a transition period, a phased introduction. And this period can be a complication. How to get there, from the current system? Who will pay the so-called transition costs? The government has not yet given this answer.

Carlos Heitor Campani, pension specialist at COPPEAD at UFRJ, welcomes the capitalization system. But he says the transition period will be critical to his success. And he advocates a hybrid regime for a period, a mixture of capitalization and ventilation.

"If we put the system of capitalization of iron and fire overnight, we will have a problem because someone must finance this transition.And the financing of this transition is by some Brasis.I strongly believe in a hybrid system with a system of distribution, which would suit the poorest segments of society, and a system of capitalization of the upper echelons of society, "he said.

The government is still discussing the transition to the capitalization regime. "How long will this transition take? We are still considering this issue," said Rogério Marinho, Secretary of Social Security and Labor at the Ministry of Economy.

In Chile, today we are criticizing the capitalization that was a success when it was implanted in the dictatorship of Augusto Pinochet. Some pensioners earn even less than the Chilean minimum wage. In practice, savings made by contributing only a portion of their salary were not enough.

The current government has sent to Congress a reform proposal in which it hopes to be able to vote this semester. Today, all Chilean workers are required to pay 10% of salary for at least 20 years before retiring. There is no contribution from employers and the state to welfare. The reform of the Chilean government provides that companies will collect an additional 4%, bringing the total contribution to 14%.