Aug. 14 (Bloomberg) -- Brazilian President Dilma Rousseff plans to set a minimum retirement age for private sector employees to limit its future pensions deficit, said a government official with knowledge of her decision.
Rousseff will set the age at 65 years for men and 60 years for women. The rule would apply to future, not current, contributors to the government’s social security institute, or INSS, said the official requesting not to be named because the information was confidential. Currently, workers can retire once they contribute a minimum of 35 years for a full pension or 15 years for a partial pension, in the case of men.
Brazil’s pension fund for private sector employees had a deficit of 37.5 billion reais ($18.5 billion) in the 12 months through June, according to the INSS website. Part of the deficit is due to benefits to rural workers who contribute little or nothing to the fund.
The proposed changes would reduce long-term expenditures on social security, and could partially offset higher costs stemming from proposals under debate in Congress to ease retirement requirements for current private industry employees. Rousseff may attach the proposed retirement age changes to the bill under debate in Congress or send a separate bill after municipal elections in October, the official said.
Brazil’s economy will grow 1.8 percent this year, according to the latest central bank survey, down from 7.5 percent in 2010 and 2.7 percent last year. The slowing economy caused tax revenue in June to fall from a year earlier for the first time since November 2010.
In March, Congress approved a bill that capped pension payments for civil servants, whose fund had a deficit of 34.6 billion reais in 2011, according to the finance ministry.
Rousseff, a career civil servant and trained economist, has also ordered studies on ways to merge the so-called PIS and Cofins social security taxes and lower their overall tax level, the official said. With falling tax revenue and a series of tax breaks the government has granted this year, the finance ministry is hesitant to cut the PIS and Cofins, the official said.
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