Pension reform completes 3 years still dividing opinions

Three years after the approval of the pension reform, enacted on November 13, 2019, the changes in the rules for the retirement of private sector workers and federal civil servants still divide experts.

If, on the one hand, the reform had a greater economic result than expected, on the other hand, the changes in rules led to reductions in the amount paid to policyholders, which could have social impacts for the country in the future, say experts.

The average value of the benefit fell from BRL 1,784.79 in 2019, already considering inflation, to BRL 1,594.92 in September this year, the latest data available.

The main change promoted by the reform, and pointed out as its great legacy, was the establishment of a minimum age of 65 years (men) and 62 years (women) for retirement, eliminating the possibility of retirement based on contribution time. Advocates of reform, in turn, see the need for further changes.

Critics, on the other hand, point out as negative points the harsher cuts in pensions for death and disability retirement, the creation of a minimum age for special retirement and the “short” transition rule for those who were close to retiring when the reform took effect.

The death pension was the benefit that most changed. For those who were widowed after retirement, the calculation of the average salary now includes 100% of salaries – before, the rule provided for 80% of the highest salaries.

For those who accumulate benefits, there are reducers. The INSS pays the largest benefit in full and applies a reduction table on the second benefit.

For permanent disability retirement, former disability retirement, the calculation no longer corresponds to 100% of the average salary and became 60% plus 2% for each extra year, with the exception of disability due to work accidents.

The special benefit, granted to those who work exposed to conditions harmful to health, also started to have a minimum age.

For Leonardo Rolim, a legislative consultant specializing in Social Security, the reform focused on reducing inequalities in the Brazilian social security system, an objective that was achieved.

“In any country in the world it makes perfect sense for you to subsidize the poorest, not the richest. Our system subsidized those with the highest income,” he says.

A study carried out by him points out that the gain with the renovation was well above the estimated one. The data show that the changes have generated savings of R$156.1 billion since 2020, when the effects of the rules began to be seen in the collection.

In three years, the expectation was that something around R$ 88 billion would be saved. Future challenges, however, still remain, as a result of population aging. Projections from the Ministry of Labor and Welfare show that, in ten years, social security spending will exceed R$ 14 trillion.

For Rolim, there is still room for further discussions, advancing even further in the reform of the social security system, with the creation of a capitalization system for workers in the private sector. “It already had [capitalização] in its own regime and with the reform it grew more.”

Adriane Bramante, president of the IBDP (Brazilian Institute of Social Security Law), says that debating Social Security was necessary, but believes that the country may pay a high cost in other areas for having approved rules that, in her opinion, are harsh.

“Actually, you have an exchange: it reduces the benefit, but it increases the vulnerability, the country’s misery. Recently, a study showed that Brazil is one of the worst countries to retire”, he says.

Roberto de Carvalho Santos, president of Ieprev (Institute of Social Security Studies), points out the short duration of the transition rules for the private sector and the end of the previous reform transition for public servants as negative.

“The reform needed to be carried out, but the transition rules were tough, which causes legal uncertainty. There is a feeling that the person will never be able to retire.”

The questions about the reform are in the STF (Supreme Federal Court). Today, 12 ADIs (Direct Actions of Unconstitutionality) are discussing whether constitutional amendment 103 meets the rules of the Constitution.

Among the actions are the different rules for the calculation of women’s retirement in the general regime and in the proper regime, the new contribution rates for civil servants, considered confiscation by category, and the calculation of the pension for death.

The trial of the cases began in September of this year, jointly. So far there are two votes, one for constitutionality and another that sees some points as unconstitutional.

Renato Fragelli, professor at EPGE (Brazilian School of Economics and Finance) at FGV (Fundação Getulio Vargas) Rio, says that the reform should have been more profound, establishing an equal minimum age for men and women.

Now, however, he says new changes are not a priority. “What we have to do is tax reform,” he says.

In a note, the Ministry of Labor and Welfare states that constitutional amendment 103 had sustainability in the medium and long term as a legacy. “In the first post-reform years, there is already a deceleration in the growth of RGPS expenditure [que engloba trabalhadores do setor privado] and an increase in the collection of RPPS [válido para servidores federais] of the Union”, says the text.

Queue and wait to retire

The queue of requests for retirement at the INSS skyrocketed in the year in which the reform was approved. In July 2019, it surpassed 2 million requests and remained at a high level for the last three years. The monthly average of insured people in the queue was above 1.5 million in October this year, when it dropped to 976 thousand requests.

Adriane, from IBDP, says that this queue, which is a remnant not only of the reform, but also of a pandemic, employee strike and lack of servers, burdens public coffers.

“Did retirement delay? Yes. But the INSS took five months to adapt the system to the new rules, which is in the reform bill. With that, more interest is paid, more corrections, and it costs more for Brazil”.

Mechanical engineer Celso Aparecido Joao, 62, is in line. He has been waiting for the release of his retirement for three years. The request was made in May 2019, three months after the PEC (a proposal to amend the Constitution) began to be processed in Congress.

Joao applied for the benefit at the age of 59 years and 9 months, after 40 years of work. This was his second order. In 2017, he even had his retirement released, but the social security factor reduced the income he would receive and he gave up.

With the beginning of debates on the pension reform, he decided to retire in 2019, taking advantage of the scoring rule that gave the right to the full benefit before the change.

“I already had the right, but I still waited a few months. I’ve been working since 1979, not counting my time in the military”, he says. The delay in releasing retirement was because, in 2019, the INSS did not recognize a period paid as an individual contributor.

As he has an acquired right, Joao appealed. If he didn’t prove the contribution time, he would have to enter the reform rules. Recently, he had the application approved, with recognized rights, and is awaiting implementation, which should be released soon.

Lilia Regina Guido Policastro, 62, did not have to wait for retirement like Joao. She applied for the benefit to the INSS in August of this year and already had her income released, but she was shocked by the amount. “The entitlement would be almost R$5,000 and I am earning R$2,400. I have been working since I was 11 years old.”

The reason for the drop in the value of the benefit is that Lilia has been receiving a pension from the INSS for seven years, when she became a widow. After retirement, when accumulating retirement and pension, the insured has a reduction in one of the benefits.

“There were three very harsh changes, but the death benefit was the most felt. We had a pandemic, with dependents receiving 60%, 70% of the benefit amount. We will feel this over time. People will be more vulnerable , in a situation of even greater poverty”, says Adriane Bramante.

Affected by metastatic cancer, the pensioner says she is worried about her expenses. Although she undergoes treatment through the SUS (Unified Health System), she has not been able to obtain the medicines in the public network. “I buy all the medicines, and they are expensive. When I managed to stop being charged income tax, this ‘surprise’ came with retirement.”