This short article published by the OECD, highlights the importance and need for carrying out an urgent pension reform in Brazil, in the light of the high replacement rates provided by the system, at a very early retirement age, high spending on pensions, and the rapid aging of the population that will occur by 2075.

The Brazilian pension system is an exception compared to the pension systems of the OECD countries. All public pension systems in the OECD include a minimum retirement age. The Brazilian system provides high replacement rates at an early retirement age, compared to the situation in the OECD countries. As a point of reference, a worker who earns the average wage and enters the labor market at age 20, and has a complete career, receives a full pension at age 65.5 on average, within the OECD, with a net replacement rate of 53%. In Brazil, on the other hand, a man (woman) would obtain a net 70% (53%) replacement rate, at the age of 55 (50). Hence, the pension system is financially unsustainable and reform is necessary and inevitable.

Pension expenditure in Brazil increased from 4.6% of GDP in 1995, to 8.2% of GDP in 2016, despite the fact that the population is still relatively young. It is estimated that, under the current rules, pension expenditure could reach 17% of GDP in 2060, (20% of GDP if you include the public sector system) which will substantially contribute to the budget deficit of the central government.

Finally, Brazil will age quickly. In 2015, the old age dependency ratio was half of the OECD ratio; by 2050, however, the country will be close to the OECD average, and will surpass the entity in this indicator by 2075. The population of 65 and over will more than triple in the next 4 decades, from 7.6% of the population in 2010 to 38% in 2050.

This short article published by the OECD, highlights the importance and need for carrying out an urgent pension reform in Brazil, in the light of the high replacement rates provided by the system, at a very early retirement age, high spending on pensions, and the rapid aging of the population that will occur by 2075.

The Brazilian pension system is an exception compared to the pension systems of the OECD countries. All public pension systems in the OECD include a minimum retirement age. The Brazilian system provides high replacement rates at an early retirement age, compared to the situation in the OECD countries. As a point of reference, a worker who earns the average wage and enters the labor market at age 20, and has a complete career, receives a full pension at age 65.5 on average, within the OECD, with a net replacement rate of 53%. In Brazil, on the other hand, a man (woman) would obtain a net 70% (53%) replacement rate, at the age of 55 (50). Hence, the pension system is financially unsustainable and reform is necessary and inevitable.

Pension expenditure in Brazil increased from 4.6% of GDP in 1995, to 8.2% of GDP in 2016, despite the fact that the population is still relatively young. It is estimated that, under the current rules, pension expenditure could reach 17% of GDP in 2060, (20% of GDP if you include the public sector system) which will substantially contribute to the budget deficit of the central government.

Finally, Brazil will age quickly. In 2015, the old age dependency ratio was half of the OECD ratio; by 2050, however, the country will be close to the OECD average, and will surpass the entity in this indicator by 2075. The population of 65 and over will more than triple in the next 4 decades, from 7.6% of the population in 2010 to 38% in 2050.