Nov. 27 (Bloomberg) -- Brazil's Senate struck down two proposals that would limit taxation on pensions of retired civil servants, preserving government plans to use the funds from a new pension bill to reduce the federal budget gap.

Senators supporting President Luiz Inacio Lula da Silva's pension bill rejected a proposal that would exempt retired civil servants over the age of 60 from paying an 11 percent tax on their pensions, the Senate said on its Web site.

Legislators also discarded another proposal seeking exemptions for pensioners who contribute as much 4,800 reais ($1,631) a month to their retirement, the Senate said.

Senators are voting on details of Lula's pension bill, whose general framework was approved yesterday in a first-round vote. The bill is aimed at reducing Brazil's pension deficit with its civil servants, a key to reducing the budget shortfall. If approved, the bill will save the government 49 billion reais in the next 20 years, the social security ministry said.

Brazil had a pension deficit of 56.8 billion reais last year, or 4.3 percent of the country's gross domestic product, according to the social security ministry. Civil servants' pension fund deficit accounted for 39.8 billion reais, or 70 percent of the total, the ministry said.

Last Updated: November 27, 2003 12:49 EST