Pension reform saves 2 times more than expected in 3 years, says study

Almost three years after its promulgation in the National Congress in November 2019, the Social Security Reform has already generated savings of more than R$ 156 billion in public accounts in the period. This number is almost twice as high as initially estimated by Congress, at R$87.34 billion, from 2020 to 2023.

The conclusion comes from the budget consultant of the Chamber of Deputies Leonardo Rolim, who presided over the INSS (Instituto Nacional do Seguro Social) between 2020 and 2021. The calculation was published by Folha de S. Paulo and confirmed by the CNN Brasil Business .

The expert explains that part of this greater savings comes from more conservative estimates made by the government, something natural, but also from Provisional Measure (MP) 871, known as “MP Antifraud”, which was converted into Law 13,846/2019 by Congress. The rule allowed the government to comb social security and assistance benefits.

“Part of this savings comes from other measures taken in addition to the PEC [da Previdência], especially MP 871, which inhibited fraud. It is not possible to know how much came from there, but a part is due to it, which became law,” he said.

The MP provided instruments for the INSS to implement measures to carry out benefit review operations, identifying amounts above the social security ceiling or, otherwise, beneficiaries who did not meet the requirements to receive the amounts.

In 2019, the first year the project took effect, the institute had saved R$4.3 billion by September. The fine-toothed operations found cases, for example, of benefits of BRL 14,000 and BRL 15,000 per month, above the ceiling, with accumulated losses of up to BRL 193,000.

The request of CNN Brasil Business, Social Security also reported that, so far, R$ 229 million have been invested in bonuses for civil servants who analyzed processes beyond the established goals. As a result, the agency says, around 3.3 million benefits were analyzed, 2.7 million of which refer to requests for initial recognition of rights, which represented savings of R$ 3.1 billion.

In this sense, the measure had “quite an effect and impact on this economy”, says Raul Velloso, economist and president of the National Forum. He points out that, before the reform and the MP, social security spending had real growth of around 5% per year. After the projects, the growth was 2% on average.

The government forecast is that the savings with the new rules for retirement of the General Regime (private sector) and public servants would reach R$ 800.3 billion in ten years. “Without a doubt, this number will have to be surpassed”, says Rolim.

Velloso, on the other hand, considers it difficult to say whether the amount saved will be greater or less than that projected by the federal government and that “the degree of economy depends on measures such as the effort to combat fraud, a beginning of capitalization and a federalization of the reform”.

Rolim points out that the savings provided by the reform were essential to ensure compliance with the spending ceiling. “Without the renovation, the roof would have been unfeasible. Even now, with pensions growing less, it continues to expand above inflation, it continues to be a challenge to the ceiling”. The total amount saved since 2020, for example, is almost equivalent to the budget of the Brazil aid this year, according to the consultant.

For him, the trend is for the economy to be even bigger in the coming years, reflecting the characteristics of the effects of reforms such as pensions.

“The logic is that in the first few years there are few people affected by the reforms, it has a smaller effect and it grows as the years go by. The economy grows for at least a decade and a half and, after a while, it continues to have effects, but this spending reduction acceleration curve falls because it has already managed to make the initial accumulated effect”, he explains.

New Pension Reform?

Rolim considers that, precisely because of the trend of an economy peak after 15 years, it will be necessary to re-discuss the reform in the mid-2030s, addressing mainly points that were left out of the 2019 project. However, the depth of the Pension Reform was large, allowing future changes to be simpler.

“One of the points is the fixed minimum age, which does not automatically increase with the increase in life expectancy. We will also need to revisit the issue of the three-year age difference between men and women, and the difference in contribution time between beneficiaries in rural and urban areas”, he argues.

Another possible change, he suggests, would be to create a capitalization layer, in addition to improving the automation of processes, all seeking greater sustainability of the social security system.

However, Velloso believes that, with a large and larger-than-expected economy, discussions about changes to general social security rules “are no longer a priority”, and that “the focus has to be more on fighting fraud and creating a capitalization layer”. . You have to look at where things are more complicated, and the most complicated thing is replicating this effort to adjust the social security system of the states and municipalities, where there is a lot of work to be done”.

He recalls that “the approved reform was not automatic for states and municipalities, each one would have to do their own thing, and there was pressure from the civil servants to do so. It’s not an easy thing to do, because the opposition is stronger.”

Therefore, Velloso argues that, at the moment, one should not “burn political energy, which is scarce, with a segment or a sector that worked well with the reform. We have to leave that for later, focus energy on other areas”. “Welfare has a very large burden on the budget, and limits investment potential”.

The most important effort, in the economist’s view, is to find ways to save more and make the pension system “as self-sustainable as possible”, without focusing on “crumb savings year after year”.

Leonardo Rolim, on the other hand, believes that “the basic social security system is deficient anywhere in the world, but it cannot be much, it must be possible to cover it with tax revenue. Our system was in deficit and subsidized the richest in relation to the poorest, and the rich were the target of the reform, extinguishing retirement only for contribution time. Today there is a deficit level compatible with the costing capacity, but it has to be constantly monitored”.

But the quantitative effect of the Pension Reform is not the only one, and it is also necessary to take into account its qualitative effects on the beneficiaries, says Adriane Bramante, president of the Brazilian Institute of Social Security Law (IBDP).

“Although a greater amount was saved, the insured party was harmed by the reform, because we had an extremely reduced death pension, with a reduced value and calculation basis, which was a hard change, especially for the elderly”.

For Bramante, taxpayers are “unmotivated” to contribute to the social security system after the reform due to the end of retirement due to contribution time, in addition to the low minimum value of the benefit.

In this sense, she believes that it would not be necessary to carry out a new reform, and that it is necessary to review elements such as the death pension or disability retirement, with a focus on reducing losses, but without returning entirely to the previous system.

“It is possible to have a balance between spending and helping people. It’s no use saving if it harms people too much, because it discourages social security. It is possible to have savings without harming anyone,” he says.