Retirement through the INSS with the best tips for retiring Benefits in general gained new calculation rules with the pension reform. That almost everyone already knows. What people usually ignore is that the pension under the new rules may be higher than those granted under the rules prior to November 13, 2019.
The pension reform brought the possibility of discarding the lowest contribution salaries from the retirement calculation base. That’s where the secret of the best retirements may lie.
To understand if the rule applies to your case and favors your retirement, you need to know what the discarding of wages represents in social security life and do accounts with those who understand this subject.
The possibility is contained in Constitutional Amendment 103/2019: “Contributions that result in a reduction in the value of the benefit may be excluded from the average, provided that the minimum required contribution time is maintained.” (art. 26, paragraph 6)
Discard rule is not the bottom 20% exclusion rule
There are those who confuse the discard rule created by the reform with the rule that existed before, excluding the 20% lowest contribution wages. They are very different.
In the discard rule, the exclusion of contribution wages that lower the insured’s average is allowed, but it is not an automatic exclusion. The insured must make calculations to find the best result because the withdrawal of the lowest wages will also exclude the corresponding contribution time.
So, if you think about using the discard rule, the first thing to know is if you have more contribution time than the minimum necessary for the retirement rule you are going to access.
It works like this: if the retirement rule you intend to request requires 35 years of contribution and you have 36 years of contribution, it is possible to exclude 12 months of contribution whose wages have been lower. In this way, your average contribution will be made with the salaries of the remaining 35 years.
Disposal must be done through very precise calculations, since when changing the contribution time, the coefficient that increases the value of the pension for each surplus year also decreases.
It seems difficult? Examples are good for clarification.
Think of a woman, aged 62, with 29 years of contribution, intending to ask for her retirement under the new rules.
The calculation of this retirement will be done in two phases. The first contains the average of all contribution salaries since July 1994. This average is called benefit salary. Considering that this woman has 14 years of contribution more than the minimum period of 15 years necessary for her retirement, for each year of surplus contribution she adds 2% to the 60% obtained in the minimum period. So, this woman’s coefficient will be 88% and it is this percentage that she will receive from the benefit salary.
See, if on the one hand it can exclude what corresponds to 14 years of contribution to increase its average value, on the other hand, by excluding lower wages, it also reduces the 2% coefficient added to each surplus year.
Did you realize that the disposal needs to be done from different simulations to reach the best final value? It is possible, for example, to increase the average, so that even with a lower coefficient, a higher retirement is achieved.
The bottom 20% exclusion rule
I started this article remembering that it is common to confuse the discard rule with the exclusion of the 20% of the lowest wages. Having clarified the discard rule, I will explain how the latter works.
In the previous legislation, the calculation of the benefit salary was made with the average of the 80% highest contribution salaries from July 1994 until the date of the retirement request. The lowest 20% contribution wages were excluded to find the mean. Contribution periods were not discarded along with contribution wages. The exclusion was made only for purposes of calculating the retirement amount, but not for calculating contribution time.
It is worth remembering that everyone who has met the requirements to retire by November 12, 2019 has a vested right, and in this case it is important to assess which rule brings the best benefit.
The Miracle of the Single Contribution
It was due to the disposal rule provided for in EC 103/2019 that the Miracle of the Single Contribution emerged, as a way of improve by almost four times the retirement of many people who would receive a minimum wage. It is possible to achieve this result with a single contribution made on top of the pension ceiling.
In the age-based retirement transition rules, women retire in 2021 at 61 years of age, 15 years of contribution and 180 months of deficiency. Men, on the other hand, retire at 65 years of age, 15 years of contribution and 180 months of grace period (and 20 years of contribution, if they are members of the INSS from November 13, 2019).
For the calculation of retirement, only contribution salaries referring to July 1994 until the date of the retirement request are considered, but contributions prior to that date count towards meeting the necessary contribution time.
Thus, imagine a woman who, having been born in 1960, is now 61 years old, and has worked and contributed to the INSS from June 1978 to June 1994, and after that date, got married, had children and stayed for a long time without any contribution to the INSS. In 2019 and 2020 she decided to make contributions again, but since she had no income, she made contributions as an optional insured person on a minimum wage.
Considering that she has fulfilled the minimum grace period, has 18 years of contribution, and already has the necessary age to retire, the value of her retirement can be one minimum wage or R$ 3,860.00.
The calculation of your retirement will be based on the contributions for the years 2019 and 2020 (24 months of contribution). Those contributions made before July 1994 are not included in the calculation of the retirement amount, you already know that. If our insured person goes to the INSS and asks for her retirement, the INSS will grant her a retirement in the amount of one minimum wage.
If, before requesting her retirement, that same insured person makes a single contribution to the INSS of R$ 1,286.71 as optional under the ceiling, today R$ 6,433.56, she will have a retirement corresponding to 60% of the ceiling amount, which is R$ 3,860 ,00.
If it was not possible to dispose of contributions, even with the contribution over the ceiling, the retirement amount would be one minimum wage. The reason is that the average between 24 contributions of one minimum wage and one contribution over the ceiling would be R$ 1,313.35, and, on the average, the coefficient of 66% (18 years of contribution) would be applied, resulting in an amount lower than the minimum wage. Since no pension can be less than the minimum wage, she would receive the minimum wage.
It is easy to see how beneficial the discard rule of the new legislation can be with the example of “one-off miracle”. But it is necessary to be aware, as the federal government promised to issue a provisional measure to prevent the use of the disposal rule in this way. Other than that, it is not recommended to try to use the discard rule without accurate calculations, made by specialists in Social Security Law.
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Priscila Arraes Reino, lawyer specializing in social security law and labor law. Lecturer and partner at Arraes e Centeno Advocacia. Visit our website: arraesecenteno.com.br/