BRAZIL - The link between the minimum pension and the minimum wage must be severed to prevent further rises in the deficit of the Brazilian social security regime for the private sector.
This is according to the Organisation for Economic Co-operation and Development (OECD), who in its latest economic survey of Brazil called for further pension reform and outlined how this should be undertaken.
According to the organisation, the link between the minimum pension and the minimum wage should be replaced by indexation to a price index that reflects pensioners' consumption.
The link was the main cause in a rise in deficit of social security regime due to increases in the minimum wage.
In addition to abolishing this link, the OECD said Brazil needed to introduce a minimum retirement age and should gradually raise the minimum contribution period of 15 years.
The OECD also called for the creation of complementary pension funds for civil servants. A defined contribution set up was recommended.
Currently, responsibility for collecting contributions is being transferred to the Federal Revenue Service. Although this will help strenghten the administrative controls, it will not tackle the root causes of the financial imbalance of the social security system.
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