Pension reform: adjustment or regression?

The Pension Reform is a hotly debated topic for touching on essential aspects of people's lives, especially in times of vulnerability, such as old age in the event of retirement and the death of a family in the event of a pension. It is foreseeable that, due to the nature of the subject, the focus of the discussion is lost: is the Pension Reform necessary? If so, how to do it?

The Brazilian social security system is unsustainable in the way it is currently configured. In 2016, there was a deficit of about one hundred and fifty billion reais in the private sector and one hundred and fifty-six billion reais in the public sector. The difference between the two systems is that while the former paid benefits to just over twenty-nine million people, the latter paid for the expenses of less than four million citizens. Negative numbers are growing every year, currently committing about forty percent of the federal budget to social security.

The situation described tends to worsen because of the demographic question. The analysis of the Brazilian age pyramid demonstrates the change in population profile: while the top presents continuous densification, the base is increasingly thinner. Therefore, the number of older people increases and the number of young people decreases, materializing the trends observed in recent times of declining birth rates and increased life expectancy, this phenomenon being produced by the advancement of medicine and better living conditions of the population. Faced with such a scenario, the account clearly does not close, as there are more and more beneficiaries and less and less taxpayers of the social security system.

It is important to note that the principle of solidarism that governs our system, unlike the capitalization regime that exists in Chile, for example, demands some sacrifices from the population, considering its intergenerational character. In order for the system to be sustainable in the medium and long term, certain adjustments must be made, seeking to adapt our system to Brazil's financial capacity. Of course, for this bitter task, some categories will lose differentiated rights, which are not attributed to other portions of society and do not present grounds for their maintenance. The notion of solidarity of the Brazilian society will be put to the test, preserving the most vulnerable sectors, within the possibilities of the system.

The need for adjustment in the pension system is a prerequisite for the balance of public accounts. Expenses higher than collection, as is the case today, cause debt growth and the decrease of funds available for investment. If the government chooses to issue currency for debt repayment, this would trigger an inflationary spiral that would mainly affect the poorest people, generally without access to financial instruments to protect against inflation. If approved, the reform could lead to a drop in the interest rate, stimulating investment and consequent job creation.

The reform affects private sector workers and federal civil servants, not including the military and, initially, the municipal and state civil servants. The main points are: as a general rule, the stipulation of minimum age of 65 years for men and 62 years for women, with need of contribution for 25 years for both sexes; progressive transition rule, with a minimum initial age of 55 years for men and 53 years for women, with a toll of 30% of the contribution time remaining missing (the initial minimum age will increase by one year every two years from 2020 to the minimum age laid down as a general rule); the calculation of the benefit will be based on 70% of the average contributions of the workers, observing the annual increase of 1.5% from the 25th year of contribution, 2% from the 30th contribution year and 2.5% from from the 35th year of contribution until the 40th year, totaling 100%. Rural workers, beneficiaries of death pensions, certain types of teachers, police officers and recipients of continuous benefit are affected by changes, based on specific rules. It is noted that the exclusion of certain categories and the change in the situation predicted for certain vulnerable classes of people diminishes the force of the argument that the whole society should give its share of contribution to the sacrifice produced by the necessary structural adjustment of the social security.

The pension reform presented to society through the Proposed Constitutional Amendment No. 287 of 2016 is not perfect, but it is necessary. Community sentiment, however, should prevail, with the attainment of all social sectors, greater loss for the more affluent layers and protection for the most vulnerable. This is the social pact that Brazil needs today and tomorrow.