Brazil’s Senate gave final approval yesterday to a bill that seeks to gradually eliminate the country’s pension deficit by limiting government payments to 3,916 reais ($2,144) per month to retired public workers.
To receive more, public workers must make contributions to individual retirement accounts created by the law, with the government’s matching contributions limited to 8.5 percent of the amount by which each employee’s salary exceeds the pension ceiling.
“It’s a positive measure in the medium and long term,” said Flavio Serrano, senior economist at Espirito Santo Investment Bank. “It reduces pressure on public accounts mainly because pension payments, in the current system, are a burden to government and to society,” he said in a telephone interview from Sao Paulo.
Retired government workers now receive 80 percent of their average salary of their last decade of employment. Brazil racked up a 34.6 billion-real deficit last year to cover the pensions of 949,000 retired civil servants, compared with a 36.5 billion-real deficit for 29 million citizens receiving social security, according to a Finance Ministry statement presented to lawmakers.