Report Nº: 85009/03/2020
Even with the proposed reform, the costs generated by the retirements of judges and ambassadors will not be able to be covered by their contributions. This is very inequitable because it forces the State to pay subsidies to retired judges and ambassadors that are much higher than those received by low-income families.
The Congress gave half approval, with some modifications, to the bill submitted by the Executive to reform the pensions’ special regimes of judges and ambassadors. The parliamentary debate was filled with controversy over issues unrelated to pensions, such as accusations of inducing resignations of current judges to appoint like-minded ones or the vote of a parliamentary designated as ambassador. This increases the importance of not losing sight of the central issues, which are, how necessary it is to review these special regimes and whether the reform responds to this need.
The main argument for change is that these are privilege regimes. Within the ambiguity that underlies this denomination, in principle, it refers to rules more beneficial than those foreseen in the general regime that are not legitimized by labor penury or by higher contribution.
The technical documentation that supports the proposed legislation provides the financial statement of the special regimes for judges and ambassadors. According to this source and complementary data from ANSES and the Ministry of Welfare, it can be seen that
These data show that State subsidies supplement between one third and one-half of the contributory pensions of retired judges and foreign ministry officials. In other words, the contributions from the active judges and ambassadors are not enough to cover the cost of retiring earlier and with much higher pensions than the general regime. This is not the only or the largest regressive expenditure that the State has, but it is one of the most irritating. Retired judges and foreign ministry officials receive state subsidies every month for approximately more than 10 times what a poor household receives.
The next question is whether the project succeeds in correcting this inequity. As it was approved in the Chamber of Deputies, some progress is made. For example, the universe of public employees covered by the special regime is reduced, the average salary of the last 10 years is taken instead of the last salary for the calculation of the initial benefit, the age of retirement for men, and personal contributions are increased. However, this is not enough to eliminate the State subsidy. This is mainly because the initial benefit is still calculated at 82% of the reference salary, a much higher percentage than in the general regime.
The reform –as half approved by Congress– means progress, but also a missed opportunity. The discussion of this law was the appropriate instance to set a precedent that, if any sector aspires to have a special treatment (either to retire earlier or to have higher benefit), the higher costs have to be covered by a specific scheme. Particularly, with higher contributions administered through a mutual fund and not with hidden subsidies from the State. This scheme would have helped to improve the pension system in general, to achieve a fairer, more transparent, and more sustainable scheme.
The refusal of Parliament to unify the retirement age at 65 for men and women also represents a missed opportunity. The fact that the State subsidizes the early retirement of a small group of women who had a good chance to obtain an excellent job with a high salary is unfair in the face of the enormous mass of women who are relegated to labor inactivity and/or informal jobs.