Statutory Old Age Pension Scheme for Private Sector Employees

Mandatory insurance

• Economically active part of the population, including private sector employees and the self-employed.
• Public sector employees, if the public entity for which the person works stipulates so (otherwise: see old age pension scheme for public sector employees).

Voluntary insurance (Segurado Facultativo)

• Individuals who do not fall under the mandatory system, including housewives, students, unemployed persons, inmates, and students with scholarships.

General finances

• Mainly PAYG-financed from insurance contributions, with federal transfers financing the deficits of the system.

Contribution rates to mandatory insurance

• Varying shares of monthly gross incomes with contribution assessment ceiling (BRL 6,101 in 2020).
• Contributions shared between employee and employer.
• Employees’ contribution rates determined by income brackets (marginal increase): 7.5% up to BRL 1,045; 9% for BRL 1,045 to BRL 2,089; 12% for BRL 2,089 to BRL 3,134; 14% for BRL 3,134 to BRL 6,101.
• Employer must pay contributions equal to 20% of monthly payroll, 7.6% of monthly gross income, and 9% of monthly net profits (three distinct contributions intended for financing the social security system).
• Self-employed persons: 20% of earnings
  (= contributory earnings are used to calculate the pension benefit).

Contribution rates to voluntary insurance

• No fixed share/contribution rate; contribution can be chosen freely within predefined range (between 20% of the minimal wage (BRL 1,045) up to 20% of the contribution assessment ceiling (BRL 6,101).

• The ‘National Social Security Institute’ (INPS) manages the system.

Qualifying conditions

• Standard old age pension: statutory retirement age is 65 for men and 62 for women; minimum insurance period: 20 years (15 years for men already insured before the Constitutional Amendment 103/2019).
• Special conditions apply for rural workers, native Brazilians, and fishermen (age 60 for men, age 55 for women; 15 years); teachers (age 60 for men, 57 for women; 25 years); persons working in hazardous job (depending on the degree of the hazard, retirement ages are 55, 58, or 60 years, with a minimal insurance period of 15, 20, or 25 years).

Early retirement

• Since 2019, no possibility to retire before the statutory retirement age (since Constitutional Amendment 103/2019).

Deferred retirement:

• Retirement can be deferred to increase pension benefits (general benefit calculation rules: 2% per year); no additional positive adjustments apply.

Combining employment & retirement

• Termination of employment is not a precondition for claiming pension benefits.
• When claiming pension benefits, continuous employment is permitted without a specified earnings limit; persons can increase pension benefits.

Pension benefits

• Primarily based on the amount of contributory earnings throughout working career.
• Maximum amount: BRL 6,101 (in 2020).
• Minimum amount: equal to the minimum wage (BRL 1,045 in 2020).

Benefit calculation

• Pension benefits equal 60% of the mean of all contributory earnings for the minimum insurance period (20 years for men, 15 for women) plus 2% for each additional year of contribution payments (i.e. pension benefits equal 100% of the mean of all contributory earnings for men who contributed for 40 years, and for women who contributed for 35 years).
• Adjustments: new adjustment rule for 2020 yet to be specified and implemented.

Taxation and social security contributions

• Pension benefits are subject to income tax; benefits up to BRL 1,903 are exempted from income tax for retired persons older than age 65.
• Retired persons do not have to pay social security contributions on pensions received.