The National Superintendency of Complementary Social Security (or Previc), a new pension regulator for Brazil's closed pension funds, was created on January 26. Previc—which replaces the previous regulator that was subordinate to the Social Security Ministry—is autonomous, administered by a board, and has its own budget financed mainly through fees paid by the pension funds based on their assets under management. Closed pension funds are sponsored by one or more companies in the same sector or industry, by labor unions, and by professional groups for their employees. At the end of September 2009, there were 372 closed pension funds with 475 billion reais (US$254 billion) in total assets under management.
Open pension funds, the other type of occupational pensions in Brazil, are open to the general public and are run by insurance companies, bank subsidiaries, and nonprofit organizations. The Insurance Supervisory Authority, a semiautonomous agency subordinate to the Ministry of Finance, oversees the open funds, which managed approximately 390 billion reais (US$208 billion) in July 2009. Both types of occupational pension funds supplement the mandatory public pay-as-you-go system.
On June 15, President Lula approved a 7.7 percent increase in public pensions that was passed by the legislature in May; he originally proposed 6.14 percent. The increase is retroactive to January 1, 2010, and affects some 8.3 million beneficiaries whose pensions are higher than the minimum monthly benefit (505 reais or US$283). The government estimates the cost of this higher increase at 1.6 billion reais (US$898 million) per year and plans to make budget cuts to offset the additional cost.
At the same time, the president vetoed another provision passed by the legislature that eliminated the social security factor (fator previdenciário) set up in 1999 to encourage workers to defer retirement, by calculating benefits according to the insured's contributions, age, and life expectancy at retirement. According to government projections, maintaining this adjustment could save the government from 20 billion reais to 30 billion reais (US$11.2 billion toUS$16.8 billion) over the next 5 years. The social security factor is mandatory in benefit calculations for workers insured after November 1999 who qualify for the Contributory Pension (35 years of contributions for men and 30 for women).
Brazil's public pay-as-you-go system covers most private-sector workers and the self-employed. Workers contribute between 9 percent and 11 percent of earnings, depending on their level of earnings, and employers contribute 20 percent of payroll for old-age, survivors, and disability insurance (OASDI); sickness and maternity benefits; and family allowances. The self-employed contribute 20 percent of earnings for OASDI and sickness and maternity benefits. Earmarked taxes cover administrative costs and the government pays for any deficit. Since 2009, the social security deficit has grown by almost 13 percent (inflation-adjusted) and is currently close to 45 billion reais (US$25 billion).
Article with courtesy of Social Security Online