Brazil will need new pension reform, says World Bank

Brazil will need a new Social Security reform before 2040, even though it promoted generalized changes in retirement and pension legislation in 2019. The assessment was published by the World Bank in the report “Social Protection for the Brazil of the Future”. For the institution, the current design and expenditure trajectory of the social security system are unsustainable.

The document cites that contributory and non-contributory pensions operate in isolation from each other, but together they undermine the incentives of many individuals to contribute or compensate little for those who contribute the most.

Another problem, in the assessment of the World Bank, is the proliferation of subsidized retirement schemes for self-employed workers – as is the case, for example, with the contribution of Individual Microentrepreneurs (MEIs).

There are also thousands of pension schemes offered by subnational governments (states and municipalities) that guarantee privileged benefits and represent a large portion of their total expenditures.

“Unless these schemes are reformed, they are likely to cause a shift in subnational spending to other priority areas in the future,” says a World Bank report.