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On 12 November 2019 Brazil’s government enacted a constitutional amendment that reforms the country’s social security pension system. The government estimates that this reform will reduce public spending on pensions by BRL 800 billion over the next ten years.

Overview of the reforms

The main changes introduced by the pension reforms are:

Minimum retirement age: A minimum retirement age has been introduced to qualify for an old-age pension. The minimum retirement age is age 65 for men and age 62 for women. (Previously individuals could retire at any age if they had completed 35 years (men) / 30 years (women) of social security contributions.)

Minimum contribution requirements: men who enter the workforce after 12 November 2019 are required to have at least 20 years of contributions to qualify for an old-age pension. For women, the minimum contribution period is 15 years.

Transitional arrangements apply for individuals who participated in the social security system before this constitutional amendment: once they have completed 15 years of contributions men can retire at age 65 and women can retire at age 60 initially – from 1 January 2020 this gradually increases to age 62, with an increase of 6 months to the minimum retirement age each year.

Contribution rates: from 1 March 2020 the employee social security contribution rate (previously 8%, 9% or 11%) will range from 7.5% to 11.68%, depending on earnings. For private sector employees the rates will be:

  • 7.5% of monthly earnings up to the legal monthly minimum wage (BRL 1,039 in 2020), plus
  • 9% of monthly earnings above the legal monthly minimum wage and up to BRL 2,000, plus
  • 12% of monthly earnings above BRL 2,000 and up to BRL 3,000, plus
  • 14% of monthly earnings above BRL 3,000 and up to BRL 6,101.06 (maximum monthly earnings used to calculate employee social security contributions).

The contributions for employers (typically 20% of payroll in 2019, although this can vary depending on the type of employer) will remain the same as under the old rules.

Retirement benefit: under the new system the retirement pension will be based on the average of all wages over the individual’s working life (previously it was the highest 80%) up to the maximum employee contribution salary of BRL 6,101.06. The retirement pension will be calculated as 60% of the employee’s average contribution earnings, plus an extra 2% for each year of social security contributions the individual has made in excess of 15 years (women) / 20 years (men).

Death benefit: under the new system a pension of 50% of the retirement pension, plus 10% for each dependant, will be paid on the individual’s death. The maximum pension on death is 100% of the retirement pension.

Invalidity benefit: where an individual retires on grounds of disability, the pension will start at 60% of average earnings (as opposed to 100% previously) and is increased by 2% for each year of social security contributions the individual has made in excess of 20 years.

There is no change to the state pension for individuals who qualified for an old-age pension under the pre 12 November 2019 rules. Transitional arrangements apply for private sector workers nearing retirement who had not yet qualified for a state pension under the old rules. (Each individual decides which transition option best fits their circumstances – individuals are expected to choose the option that is most advantageous to them.)
The pension reform also continues to allow rural workers and those working in hazardous conditions to retire earlier than other workers under special rules.

Looking ahead

Employers will wish to review the impact of these reforms on their HR and benefit strategies:

  • With employees likely to be working longer and receiving a lower state pension benefits, how will this impact your people management strategy and benefit policies?
  • If you offer employees a supplementary pension plan, will it need to be adjusted for the state pension changes?

The pension reform also offers an opportunity for employers to engage with their employees on retirement benefits and financial education to help them understand the implications of the reforms and plan for their retirement.


Isabel Coles

Head of International Consulting, MBWL International



Isabel Coles

Head of International Consulting, MBWL International