On 23 October 2019, the Brazilian Senate approved the final constitutional amendment of a pension reform which would:

  • Increase workers’ pension contributions rates and requirements
  • Create a minimum retirement age
  • Introduce a new mechanism for benefits calculation

While most provisions of the new reform entered into force on 13 November 2019, other provisions will enter into force on 1 March 2020.


The new pension reform aims to decrease the country’s budget deficit, which is mostly caused by the national pension system expenditures amounting to approximately 44% of the federal government’s total annual budget. Until now, the Brazilian government has been unsuccessful in trying to pass this reform for the past 30 years due to the strong opposition from labor leaders. This reform is labeled as the “greatest reform in history,” as it will directly affect 72 million individuals and has been estimated by the government to result in savings of BRL 800 billion over the next decade.

Key details

The national pension reform applies to all private sector employees, some public sector employees and self-employed people. The key changes of the new reforms are the following:

Minimum retirement age

To qualify for old age pension, the new minimum retirement age is now age 65 for men and age 60 for women. The minimum retirement age for women will gradually be raised to age 62 by 2023.

Previously, old age pension was claimed on average at age 56 for men and 53 for women.

Contribution requirements

Prior to the reform, old age pension could be claimed at any age after a minimum social security contribution period of 15 years for men and women.

Men who enter the workforce after 12 November 2019, are now required to contribute for a minimum of 20 years to qualify for old-age pension. The minimum contribution period for women remains 15 years.

Employee contribution rates

Currently the social security contribution rates that apply to all employees are:

  • 8% of monthly covered earnings up to BRL 1,751.81
  • 9% of monthly covered earnings from BRL 1,751.81 to BRL 2,919.72
  • 11% of monthly covered earnings from BRL 2,919.72 to BRL 5,839.45

On 1 March 2020, workers’ contribution rates will be replaced by progressive rates, which are:

  • 7.5% of monthly covered earnings up to BRL 998, which is the legal minimum wage in Brazil
  • 9% of monthly covered earnings from BRL 998 to BRL 2,000
  • 12% of monthly covered earnings from BRL 2,000 to BRL 3,000
  • 14% of monthly covered earnings from BRL 3,000 to BRL 5,839.45

There will be no change to employers’ social security contribution rates.

Benefit calculation mechanisms

Prior to the reform, the retirement pension formula was set at 70% of average covered earnings and 1% of average covered earnings for each additional year of service that exceeds the minimum required contribution period (15 years for men and women).

The retirement pension formula is now set at 60% of average covered earnings and 2% of average covered earnings for each additional year of service that exceeds the minimum required contribution period (15 years for women and now 20 years for men). Therefore, the maximum pension of 100% of covered earnings won’t be reached before 40 years of contribution (30 years under the previous formula).

In addition, the average monthly earnings are no longer based on the best 80% of covered earnings but on total covered earnings instead.

Employer implications

While this change has more impact on employees who need to reset their expectations on how much they must save for retirement and when they can retire, employers might also need to consider its impact on their workforces. The increase of employees’ contribution rates might warrant a potential raise of employees’ salaries. In addition, employers might want to consider more competitive supplemental pension plans and an internal communication on the change along with a potential financial education training to help employees save for retirement.