Report Nº: 78011/11/2018
2019 budget prohibits the most vulnerable retirees from working to supplement their meagre incomes. If there was an intension to take a first step towards the pension system reform, it would have been more equitable to revise the special regimes and pension rules that allow double coverage. At the beginning of 2016, the current government […]
At the beginning of 2016, the current government sanctioned the Universal Pension for the Elderly (PUAM). It is a life benefit for people who reach 65 years of age and do not have enough contributions to retire. Its amount is 80% of the minimum retirement and, like the rest of the pension benefits, the person can continue working formally as an employee or self-employed to add contributions and, eventually, access to a contributory retirement. The design of this policy is appropriate and clearly surpasses the rusticity of moratorias (free pensions with no contributions needed).
Budget 2019 also establishes that ANSES will carry out socioeconomic and patrimonial evaluations to ensure that the beneficiaries of PUAM are in social vulnerability. But it also changes the criterion and establishes that the PUAM is incompatible with salaried or self-employment jobs. In other words, a beneficiary of the PUAM will not be able to work.
In order to evaluate the pertinence of this change, it is useful to analyze how the retirees and pensioners covered by the ANSES are conformed. According to information published in theSocial Security Statistical Bulletin, there are in the national pension system:
These data show very heterogeneous situations. Those who receive the PUAM are a small group, with the lowest pensions and who suffer most from vulnerability. On them now is added the prohibition of supplementing this meagre income by working in the formality. At the same time, nothing changes for the 20% of retirees with double coverage who receive retirement and pension, for amounts equivalent to more than 3 times the PUAM and are not forbidden to work. The change adds severe inequities, especially if it is took into account that two thirds of those with double coverage obtained the second benefit with the moratoriums without making contributions.
The main factor triggering the country’s crisis is the lack of progress in reforming the pension system. There is no way to clean up public accounts by circumventing this issue. Pension expenditure represents almost half of public expenditure with a tendency to growth due to population ageing. Trying to reach fiscal equilibrium without ordering the pension system explains why Budget 2019 appeals to emergency measures that damage the possibility of progress, such as the reduction in public investment and the application of highly distorting taxes.
Even more striking is the fact that the scarce references to pension issues in Budget 2019 are to prohibit the beneficiaries of PUAM (i.e., the most vulnerable) from continuing to work on legality in order to obtain additional income. Would it not have been fairer to be more restrictive with those who receive two benefits –for example, with less beneficial adjustment rule than the general one for those who accessed a second benefit through moratorias– and to avoid duplication of benefits in the future? Would it not contribute more to the sustainability and equity of the system to review the special regimes (or privilege regimes) that retire people with less age, less contributions and/or with higher pensions than the general regime? It is striking that the International Monetary Fund (IMF), with all its deployment of professional experts, has not noticed this gross inconsistency.
The previous government left the pension system bankrupt and difficult to correct because it indiscriminately distributed benefits that are judicially very risky to alter. But with a little imagination and professionalism, it is possible to begin reducing the damages, reverse trends and give sustainability and equity to the pension system.