The Brazilian state pension system has two fundamental problems: a funding mechanism that is deeply dependent on payroll contributions, which exposes it to the performance of the private sector; plus its role in helping to perpetuate inequality. There is a clear need for the second and third pillars to develop.
Despite the fact that around 65% of the working population in the country’s private sector is protected to some degree by the first pillar, Brazil’s lower-income population has immense difficulties maintaining or proving formal working relationships for 30 or 35 years. Key recent changes and discussions on the state pension system are addressing the problem of inequality. However funding, due to its political sensitivity and relevance to the public deficit issue, is unlikely to be properly dealt with in the near future. The long-term sustainability of the system is a major headache.

Insufficient benefits from the first pillar
A further problem of the state system is the monthly benefit cap, currently at around BRL 3000, which together with benefit reduction mechanisms seriously jeopardizes its effectiveness. A significant portion of the private sector workforce needs to finance its retirement from additional sources.

Occupational pension market not yet fully developed
The occupational pension system in Brazil is neither sufficient nor mature, mainly because the majority of private sector employers are small and mid-size companies that do not offer basic coverages to employees. Life insurance companies are working to develop suitable products for this market. Large national and multinational companies, on the other hand, generally provide comprehensive additional employee benefits, although they also suffer the challenges of extremely high taxes and payroll contributions.

No confidence in public pensions, low risk awareness
Brazilians do not trust the state pension system, and most private sector workers cannot rely on it to cover their needs during retirement. (As is so often the case, the pension scheme for public servants and the military provides more generous benefits.)

According to a survey conducted in April 2011 by the Brazilian Human Resources Association, 70% of individuals who have already thought about retirement intend to continue working after retirement age, to complement their public pension income.

Research conducted in the Brazilian metropolitan areas revealed that only 22% of the population have a death or disability policy. Of these, only 14% bought the coverage themselves, with the rest acquiring it through their employer (44%), or as a feature of other products or services. Currently, however, the most important risk needing additional protection is health, due to Brazil’s extremely precarious public health system.

Icatu Seguros
As the first and largest independent life and pension company in Brazil, Icatu Seguros is striving to become the carrier of choice for employee benefits in Brazil, and is expanding its reach to small and mid-size companies. Other important challenges are to enhance customers’ financial education and awareness, and to expand its product portfolio - particularly in the underdeveloped annuities area.

For more information
please visit
or contact Ms. Vanessa Donke
Phone: +55 11 347 23 916