The Impact of the 2019 Brazilian Pension Reform on Survivor Benefits

In 2019, the government of Brazil passed the most comprehensive pension reform in the country's history. Contribution rates were increased, and the two types of old-age benefits were unified. Several elements of the eligibility conditions were modified, such as the retirement age, contribution period and the formula for calculating old-age benefits. There were also changes in the formula for survivor benefits, with a decrease in the reversion rate, from 100% to 60% for a widow with no children. This article aims to quantify the distributive effects of the reform, focusing on the changes in the survivor benefits. We calculated four individual pension indicators: Replacement Rates, Internal Rates of Return, Required Contribution Rates, and Effective Contribution Rates, in pre- and post-reform conditions, using actuarial annuities. We constructed profiles of representative married individuals, for different combinations of income, retirement age, contribution time and sex. Two extensions were made: (i) increase in the age difference between spouses; (ii) reversion of the benefit from a female worker to a male spouse. The reform reduced the values of all indicators. There was a drop in the dispersion of Replacement Rates, except for the highest income level. There is a much more significant drop in the Required Rates for survivors than for old-age benefits. This is evidence that the new rules for survivor benefits play a major role in the actuarial adjustment of this reform. The values of the IRRs have a significant drop, due to the increase in the full retirement age, reaching negative values for some workers. Greater age differences for the spouses lead to smaller drops in indicators. When the survivor benefit originates from a female worker, the reduction in the indicators is less expressive. The set of results presents a clear, although heterogeneous reduction in the distributive aspects of the Brazilian pension system, which shows that this reform increased the sustainability of the national pension scheme, at the expense of a notable reduction in the adequacy of benefits, which affects mainly low-income workers. The progressivity of the pension system has also dropped significantly, with a worrying reduction in the distributive aspects.

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