Retirement in Brazil Means Higher Share of Income Compared to Other Countries

01/16/2017 - 14h01

Brazilians maintain a larger portion of the income they enjoyed before leaving the workforce compared to retirees in other countries.

On average, Brazilians, upon retirement, receive pensions that equal 82.5% of average income. For a middle-income worker, that percentage drops to 76.4%, according OCDE's (Organization for Cooperation and Economic Development) findings for 42 countries.

In Chile, pensions amount to 37.7% of average income. In Mexico, the percentage is 28.4. In the United States, 44.8%.

Raised to international standards, the Brazilian system's so-called replacement tax could be reduced if the administration's proposed pension reform plan makes it through Congress.

The proposal will make pension access difficult, requiring a minimum age of 65 and at least 25 years of contributions, in addition to changing the formula used for the calculation of benefits.

Among Brazilians who retire by age, the most common retirement factor by existing rules, the benefits amount to 96.3% of income, according to the calculations of economist Luís Eduardo Afonso, from the University of São Paulo (USP).

For experts, the issue lies in the income maintenance level for workers with high wages.

For those who retire according to contribution time -generally professionals in the formal sector who often retire before the age of 55-, the pension, on average, corresponds to 74% of previous income, according to Luís Eduardo Afonso.

The fact that people with lower incomes manage to maintain a higher percentage of their salaries in retirement, while the rate is lower for the richest, seems positive at first glance but must be analyzed carefully.

Translated by SUGHEY RAMIREZ

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