Pension reform saves 156 billion reais in 3 years and exceeds initial estimates

Pension reform saves 156 billion reais in 3 years and exceeds initial estimates

The pension reform, approved at the end of 2019, is approaching its three-year term with the perspective of an impact on public accounts greater than initially anticipated by the government.

Unprecedented recognition received binding It states that the resource savings provided between 2020 and 2022 should reach R$156.1 billion. The value is 78.8% higher than expected for the same period when the text was approved by Congress – R$87.3 billion, with figures already updated.

The calculation was made by Legislative Adviser Leonardo Rolim, who is an expert on the subject and worked directly in the formulation and implementation of the proposal as Minister of Social Security and President of the INSS (National Institute for Social Security) in the Jair Bolsonaro (PL) government.

According to him, the evidence collected so far indicates that social security accounts should not be an urgent concern in future governments, depending on the potential demographic changes in the country.

The sharp slowdown in the growth of Social Security expenditures has attracted the attention of economists, who point to the outcome as a positive factor for the accounts.

For the entities that provide assistance to the insured, the larger economy with reform brings with it another facet: the scenario of very harsh rules, such as the death pension account, which failed to pay the full amount precisely when the country saw an increase in the number of deaths due to the Covid-19 epidemic.

Since the early months of implementing the reform, economists report that they have seen a greater impact of the measure, but there is still plenty of data to document it.

First evidence emerged in reports from the National Treasury, which revealed a significant improvement in the INSS deficit forecast. The gap, which before the reform would have reached 11.64% of GDP (Gross Domestic Product) in 2060, will reach 8.67% on the same horizon, according to last year’s forecast. In 2022, the finish line was revised to 7% of GDP.

However, the Department of Labor and Welfare has never released new official estimates of the results obtained with approval of the reform.

Rolim left the government in November 2021, but continues to follow the case closely. To make estimates, start from the expected spending on social security in 2020 LDO (Lei de Diretrizes Orçamentárias).

Then compare the numbers with actual expenditures in 2020 and 2021 and with pension expenditure projections from the 2022 budget. The calculation takes into account some adjustment factors to avoid overestimating the effects of the reform.

In the civil servants system itself, it was necessary to isolate the effect of the salary freeze, since the categories have not been adjusted since 2019 (some since 2017). This was done using the initial projection of pension and pension expenditures for public servants without correction for inflation.

In the RGPS (General Social Security System), it was necessary to add to the actual expenditure the rulings of the Social Security Court which were deferred by the PEC (Proposed Amendment to the Constitution) of the Precatórios. In addition, due to interest correction by INPC, an inflation index has been applied to update expenditures.

After adjustments, Rolim identified R$109.5 billion in savings on RGPS expenditures between 2020 and 2022, of which R$13.6 billion in the first year, R$35.3 billion in the second year and R$60.6 billion in the third year.

The amount is greater than the R$61.7 billion that could have been saved, according to previous government calculations.

In the system of civil servants, the former minister estimates that the tax gains amounted to 46.7 billion R$ in the three years, of which 10.5 billion R$ in 2020, 15.1 billion R$ in 2021, and 21.1 billion R$ this year.

The total amount is higher than the R$25.7 billion that could have been saved in this period, according to preliminary assessments.

“The next two governments certainly wouldn’t need to worry about reforming the social security system. They should attack other areas in terms of these expenditures, but not in terms of legislation, new reform. I would venture to say it’s not just the next two, but maybe the next three,” he said. Rolim says.

According to him, even if the next government decides to resume the policy of assessing the minimum wage (which represents the amount paid to two-thirds of social security beneficiaries), the positive trend will be maintained, especially if the real gains are moderate and balanced. accompanied by increased productivity.

“If there are demographic changes beyond what you can expect, but I think it’s only in the middle of the next decade that we’ll need a new reform,” he says, listing rural retirement and a possible adjustment in the minimum retirement age as points for future reconsideration.

On the other hand, Rolim points out that social security will always remain an important issue, as it is the largest account in the budget (R$789.7 billion in the latest forecast this year). Any change ends with the billionaire’s effects on the spending cap, a rule that limits outlays to inflation disparity.

However, the design of the roof itself may end up being the subject of changes, depending on the outcome of the October elections.

The President of the Brazilian Institute of Social Security Law, Adriana Bramante, considers that the interpretation of the results of the reform depends on the perspective that has been launched on this topic.

“From a preventive point of view of death pensions, it was a mess. Months later we had a pandemic, and the benefits were drastically reduced,” he criticizes.

Before the reform, the pensioner received 100% of the value of the contribution salary to the deceased insured, regardless of the number of family members. After the changes, the account starts from the 50% limit, with an additional 10% for each dependent. Thus the childless widow gets 60% of the contribution salary.

Bramante argues that the change in the pension calculation rule has caught many families by surprise. Older people who did not have previous savings and who lived on the benefit of a spouse, for example, lost a significant part of their income after the death of a partner.

For her, the ideal is to make the pension calculation more flexible, to create a transitional rule so that the change is more smooth for the elderly, who have not had time to plan.

The IBDP chief also notes that the reform delayed retirement for many people in the context of the deteriorating labor market, and left those who needed to contribute a little longer without formal employment.

Although the Cage Register (General Register of Employees and the Unemployed) recorded 1.3 million new formal jobs in the first half of the year, fewer than 200,000 were registered in the 40-65 age group.

From a financial standpoint, financial market analysts reinforce the perception of greater impact.

“It is worth noting the slowdown in the growth of Social Security and assistance expenditures for the Institute, which is the largest initial expenditure. There has been a clear reversal in the growth of the number of beneficiaries since the implementation of reforms in recent years,” it was reported. Tullet Prebon’s chief economist, Fernando Montero, specializes in tax analysis.

Critics often cite the INSS queue as a factor that helps contain government expenditures, albeit temporarily. Insureds are left with dam values ​​while they wait for analysis. However, government technicians note that order stock is down again after bounties resumed for agency servers.

The queue peaked in July 2019, with 2.34 million requests under analysis, and gradually decreased with the execution of a bounty for each additional task to the INSS servers, but rose again in early 2021 with that bounty on hold and stabilized at a level between 1.7 million and 1.8 million requests.

At the end of April, the bonus was recreated, and the queue fell again the following month. In June, the wait actually dropped to 1.5 million orders.

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