The Brazilian federal government civil servants pension fund: actuarial results

Abstract

The purpose of this paper is to make an evaluation on pension’s replacement rate of the recently approved complimentary pension fund for civil servants of the Brazilian federal government. Using a methodology based on a stochastic actuarial model, mean and distribution of pension benefits offered before and after this new pension system were compared. Scenario and sensitivity analyses were made regarding financial and biometric variables. The conclusion is that the replacement rate depends on a set of variables, some of which are under the discretion of the participant, such as length of contribution, contribution rate and asset composition, while other variables are not under his discretion, such as the return rate on the assets composition while other variables are not under his discretion as the return rate on the assets. Comparing to the previous rules, replacement rates can be either higher or lower, but the civil servant will bear all the risk.