Enhancing the sustainability of the Minas Gerais social security system: a comparative analysis of pension models

Abstract

This dissertation examines the challenges facing the Minas Gerais government's pension system, emphasising the necessity for reform due to fiscal imbalances and the rise in the number of retirees. The dissertation examines the potential of the Notional Defined Contribution (NDC) scheme, as exemplified by Sweden, to encourage longer working periods and foster a sustainable economic environment. The proposal put forth is the transition to a notional system and the implementation of solvency insurance, to resolve deficits and increase the integrity of the social security system. The dissertation analyses the changes in Minas Gerais' social security system resulting from the transition from the PAYG system to the NDC system. It presents calculations and discussions on solvency insurance to address the deficits of the social security fund administered by IPSEMG. The objective of the simulations from 2023 to 2039 is to reduce financial losses, beginning with the establishment of a notional fund for new participants in 2023 and subsequently examining the potential of solvency insurance for current civil servants, pensioners and retirees. The analysis identifies deficiencies and potential avenues for enhanced management of the pension system, emphasizing a reduction in the ratio of actuarial liabilities. The study underscores the pivotal role of a sustainable and robust pension system for individuals and the economy at large, emphasizing the importance of capitalization and notional schemes in encouraging prolonged permanence in work and promoting economic sustainability.