Claps UC | “The best!” That is (Social Security) or as limited as possible

“The best!” That is (Social Security) or as limited as possible

As one of the main investigators of the UC flaps, Vial Joaquindevotes a significant part of his time to the analysis of pension reform, its scope and its impact.

The former vice-president of the Central Bank confirmed in an interview with DF that the agreement protocol is progress for processing the reform in the Senate, although he recalled that “everything that is being built, ultimately depends on the portfolio” and that “will never be completely closed until there is a global agreement.”

For Vial, data must be added to the recommendations. “They will think about social security that is not too expensive, that will reach those who really need it. That requires data and work,” he said.

Also, he pointed out a limited design and recalled “what the symbols we showed (in Claps) the larger the social security component, the greater the reduction in wages and employment.

• Do you appreciate that the technical record is attached to the process?
• The real benefit of the technical table is to provide the information and data and start using them to formulate recommendations.

For example, it is logical that social security should focus on the new level, that is, the amount of pension received in relation to a measure of income that we agree to before we retire.

This allows us to focus and limit the topic in a way that is easy to manage.

• What is the most appropriate time period to measure the replacement rate?
• Here one must marry a number if you want to use it as a tool to define the universe of beneficiaries. Taking the final year is a bit unusual, because it is almost never done in the world. So, you have to take something bigger than that. It may not be the whole story, either, as people progress throughout their careers. Ten years doesn’t bother me, it can be a good meeting place.

The chicken or the egg

• What effects do you see in the new 6% formula?
• In the long term, the full 6% is needed for capitalization if we want to have a good new rate for people who have regular contributions in the system.

I understand social security as a way to compensate people who have contributed 10% with more or less consistency during their working lives, but have very low replacement rates. That is a finite universe of people and it will end in a moment.

Ideally it should be as limited as possible, since the higher the percentage that goes to social security, the longer it will take for regular contributors to have good replacement rates. And like the egg or the chicken; If you extend it for a long time, finally if you stay, for example, with 4 points for individual accounts and 2 for social security, the new rates are lower. Then, money starts to be lacking and we have to start talking about price increases again.

• There are those who suggest that everything temporary is in danger of becoming permanent.
• It’s always a risk and it would be better if everything went to separate accounts, but I understand that there is an issue here and that there are not many funding options exists for this compensation mechanism. But you have to increase it. It may be something big or small. I don’t know, I think it’s less than a lot of people think, but it can still be quite expensive, because it’s not the minimum income, it’s It is an average income, maybe it is less people, but it is more. the money of the man.
• What do you think of the profit between 2% and 3% that the Government is proposing for the loan?
• If you want to be fair to the people who are going to put up the money and who are the future pensioners, who are the future pensioners, you can’t cheat. If I were to do something, I would set an interest rate that is the average return on pension fund investments. That is the fair cost for those making the loan.

One can calculate every month: if this month the average of the multifunds was 3%, then 3%, if next month it was 1.5%, then 1.5%. If they fell 1.5%, (use that profit), so that the opportunity cost of the person giving the loan in the end does not matter whether the money is in the pension fund or in the loan.

Withdraw money

The Chamber of Deputies is to vote on a new pension fund withdrawal. “I hope they vote for it with a long B and not a short V. That project is terrible,” said Vial.

For the economist, there is already enough evidence of the negative impact of previous withdrawals on the economy and households. “That people are still thinking about it, when most of the poor already have no money because they have withdrawn everything and (are) enabling entire social security operation in jeopardy, he really is a pile of ignorance, he doesn’t want to see it. the reality of the costs that withdrawal previously entailed,” he lamented.

Author: Joaquín Vial