Brazil’s supplementary pension system has reached significant institutional and regulatory maturity. Closed pension funds manage assets exceeding BRL1.3 trillion and ended 2025 with a collective net surplus of BRL17.7 billion, reversing the prior year’s BRL9.88 billion deficit, according to the 2025 Annual Report of the Brazilian Pension Fund Authority (PREVIC).

The open pension segment also performed strongly in 2025: PGBL (tax-deductible pension plans), VGBL (tax-advantaged life insurance pension plans) and traditional plans received BRL157.84 billion in contributions, with net inflows of BRL5.31 billion, according to the Brazilian Association of Open-end Pension Funds and Life Insurers (FenaPrevi). VGBL plans accounted for BRL139.31 billion in contributions (net inflows of BRL4.31 billion), while PGBL plans received BRL15.54 billion (net inflows of BRL1.20 billion). By January 2026, open pension plans held BRL1.8 trillion in reserves, accumulated by 11.2 million individuals holding more than 13.7 million plans, 99.4% of which remained in the accumulation phase.

Such figures reflect the strength of the system, but they do not necessarily define the questions that are likely to shape its future. Rather than being driven by major legislative reforms, Brazil’s supplementary pension sector is increasingly being influenced by broader economic, demographic and institutional factors. Population ageing, changing employment relationships, evolving governance standards, new investment expectations and increasingly sophisticated corporate reorganisations are redefining the issues that must be addressed by pension entities, sponsors and regulators.

Longevity and Demographic Pressures

Brazil is undergoing significant demographic changes: life expectancy is rising while fertility rates are declining. These trends are reshaping the country’s age structure, reducing the proportion of younger workers and increasing the share of retirees.

According to projections by the Brazilian Institute of Geography and Statistics (IBGE), this ageing process will accelerate over the coming decades. In pay-as-you-go public pension systems (such as Brazil’s General Social Security Regime), current workers’ contributions fund current retirees’ benefits. As the ratio of contributors to beneficiaries declines, the financial sustainability of these systems becomes increasingly strained, reinforcing the importance of supplementary pension savings.

Supplementary pension plans, however, are not immune to demographic pressures – though the effects differ depending on plan design. These plans rely on projections of life expectancy, contribution periods and benefit duration. As individuals live longer, pension entities must reassess their actuarial, financial and governance assumptions to ensure long-term sustainability.

The main consequences of increasing longevity for supplementary pension plans include:

• more frequent actuarial reviews to ensure that mortality tables and technical assumptions reflect participants’ actual life expectancy;
• longer benefit payment periods, particularly in arrangements providing lifetime pensions, which may increase actuarial liabilities and funding requirements; and
• greater emphasis on investment performance, as pension assets must generate consistent returns over longer time horizons.

In defined benefit schemes, where the sponsor guarantees a predetermined retirement income, longer survival rates directly increase actuarial liabilities and funding obligations. Sponsors face mounting pressure to cover potential shortfalls, and any actuarial deficit must be equalised over time. The risk of underfunding grows as retirees draw benefits for longer than originally projected.

In defined contribution and variable contribution plans, the longevity risk shifts to participants. Retirement outcomes depend on accumulated balances and investment returns, meaning that participants must accumulate sufficient resources to fund potentially decades of retirement. Without adequate contribution levels or favourable investment performance, participants may face the prospect of outliving their savings.

Such demographic and investment pressures also affect open-end pension plans. When offering lifetime annuities, insurers and open pension entities typically adopt conservative actuarial assumptions – applying prudent mortality projections and discount rates – to protect against the financial risk of participants outliving their expected lifespans. While this conservative approach safeguards the solvency of annuity providers, it often results in lower monthly benefits for participants, making annuities less attractive compared to other retirement income options. Many participants opt for scheduled withdrawals or lump-sum payments rather than converting their accumulated balances into lifetime income.

Expanding Pension Coverage in a Changing Labour Market

The demographic challenges outlined above coincide with significant changes in the labour market. Brazil has witnessed a steady increase in self-employment, digital platform work and service provision through legal entities (pejotização), reducing the share of workers in traditional employment relationships.

This transformation raises a distinct challenge: while population ageing affects the financial sustainability of pension systems, labour market changes call into question whether existing supplementary pension structures, historically built around formal employment and employer sponsorship, can reach an increasingly diverse workforce.

Supplementary pension coverage in Brazil has traditionally expanded through employer-sponsored closed pension plans, with companies offering pension benefits as part of compensation packages – often with matching contributions. This makes formal employment the principal gateway to retirement savings, excluding independent contractors and workers engaged through legal entities from both plan participation and employer contributions.

The shift away from traditional employment may therefore reduce participation in employer-sponsored plans while transferring retirement planning responsibility entirely to individuals.

Recent initiatives have sought to address this gap. The Brazilian Association of Closed Pension Funds (ABRAPP) has proposed simplified pension arrangements and “micro-pension” plans targeting self-employed workers and participants in the digital economy. The private sector has also responded: technology-driven financial services providers have developed digital platforms that simplify enrolment, facilitate participant engagement and broaden access to retirement savings – particularly for small and medium-sized businesses.

This movement aligns with the Brazilian Insurance Authority (SUSEP) agenda, which seeks to foster innovation and competition while strengthening consumer protection. By reducing administrative complexity and improving the user experience, these initiatives may expand pension coverage among workforce segments that have historically faced barriers to participation.

Another significant development is CNPC Resolution No 60/2024, which introduced automatic enrolment for participants in certain benefit plans. This approach has already been adopted in other jurisdictions, and has been proven effective in increasing pension coverage. The Federal Supreme Court recently confirmed the legality of opt-out pension arrangements, providing additional legal certainty for this model.

To conclude, the future expansion of Brazil’s supplementary pension system will depend on its ability to develop flexible and accessible solutions for workers outside traditional employment relationships – one of the sector’s principal challenges in the years ahead.

The Search for Sustainable Retirement Income Solutions

Expanding pension coverage addresses only part of the challenge. Equally important is ensuring that accumulated savings provide adequate income throughout increasingly longer retirement periods.

Over the past decades, Brazil’s supplementary pension sector has experienced significant growth, consolidating its position as a principal source of long-term savings. At the same time, the gradual transition from defined benefit (DB) plans to defined contribution (DC) and variable contribution (VC) arrangements has fundamentally altered how retirement risks are allocated.

While this transition reduced long-term liabilities for sponsors and contributed to the financial sustainability of pension entities, it shifted retirement risks solely to participants. Unlike DB plans, where benefits follow a predefined formula, retirement outcomes under DC and VC arrangements depend on contribution levels, investment performance and withdrawal decisions.

This raises questions beyond the accumulation phase. Longer life expectancy and the increasing responsibility placed on participants have intensified discussions regarding retirement income adequacy – particularly in a country where long-term financial planning and voluntary retirement savings are still developing.

Unlike jurisdictions where annuity products are commonly used to convert accumulated savings into guaranteed lifetime income, retirement benefits in Brazil are predominantly structured around programmed withdrawals or lump-sum payments. Although life annuities remain available through insurers in the open pension market, actuarial assumptions, pricing structures and limited market demand have restricted their broader adoption.

Moreover, the insurance market’s participation in the closed pension fund segment remains limited in Brazil – in contrast to other jurisdictions where insurers and reinsurers play a significant role. This represents a missed opportunity on two fronts:

• first, longevity risks assumed by pension funds could be transferred to insurers and reinsurers that are better equipped to pool and manage such risks; and
• second, participants in DC and VC plans could convert their accumulated balances into guaranteed lifetime annuities provided by insurance companies, ensuring predictable retirement income regardless of how long they live.

Against this background, PREVIC recently established a working group to assess the adequacy and long-term viability of DC and VC arrangements, signalling growing regulatory attention to the issues outlined above and plan outcomes. The initiative seeks to identify structural risks and evaluate mechanisms to strengthen participant protection where accumulated balances may prove insufficient for increasingly longer retirements. This reflects an important evolution in Brazil’s supplementary pension framework: the focus now extends beyond accumulation to the adequacy and sustainability of retirement income itself.

ESG in the Private Pension Sector

ESG considerations have gradually become part of the regulatory framework applicable to pension funds, reflecting an understanding that sustainability factors may influence investment risks and long-term portfolio performance.

Resolution CMN No 5,202/2025 requires closed pension entities to consider economic, environmental, social and governance sustainability factors in risk assessments when material. The resolution does not mandate ESG investment quotas; instead, it incorporates sustainability into the existing prudential framework. In the open pension market, Resolution CNSP No 473/2024 established conditions for the use of sustainability-related terms (such as “ESG”, “green” or “sustainable”) in product names and marketing materials, requiring that claims be supported by recognised methodologies and measurable indicators.

The Federal Supreme Court recently examined the boundaries of ESG regulation in ADI 7795, declaring a provision requiring insurers and pension entities to allocate reserves to carbon credits to be unconstitutional. The Court held that mandatory investment requirements must remain compatible with prudential principles, including security, liquidity and profitability.

Corporate governance of closed pension entities has also become a central focus of recent PREVIC supervisory activities. Inspections have emphasised transparency, decision-making processes (particularly regarding investments), functional independence between sponsors and pension entities, and the depth and clarity of meeting minutes of decision-making bodies and internal policies, especially investment policies. These supervisory efforts have required pension entities to review and strengthen their policies, controls and internal procedures. This challenge is particularly acute for medium and smaller pension funds, where administrative costs represent a larger share of assets under management, making compliance with increasingly sophisticated governance standards more burdensome.

As a result, ESG and governance considerations are becoming increasingly integrated into the oversight framework of Brazil’s supplementary pension sector. These developments reflect the continued maturity of the industry, as pension entities and regulators converge around higher standards of transparency, accountability and fiduciary responsibility.

Corporate Transactions and Pension Plan Reorganisations

Pension plans in corporate reorganisations

Pension arrangements have gained increasing relevance in corporate reorganisations. Mergers, acquisitions, privatisations and internal restructurings frequently affect pension plans when sponsoring employers or business units migrate to different corporate structures. In Brazil, closed pension plans remain linked to their sponsors, which may bear ongoing funding obligations and responsibility for financing actuarial deficits.

Pension due diligence and structural transactions

Pension due diligence has therefore become a critical component of transaction planning. Key pension-related restructuring measures include:

• plan spin-offs;
• changing the entity responsible for managing the benefit plan;
• plan mergers;
• sponsorship changes; and
• sponsorship withdrawals.

However, pension plan assessments are not always conducted during due diligence in Brazil, exposing buyers to significant risks. These include recurring contribution obligations and, more critically, the duty to fund actuarial deficits – which may require substantial disbursements by the sponsor to the benefit plan. This risk is particularly acute in M&A transactions and privatisations involving state-owned enterprises and mixed-capital companies, where legacy defined benefit plans often carry material unfunded liabilities.

Corporate reorganisations also serve as a mechanism for implementing pension reforms, including the migration from defined benefit to defined contribution arrangements, aligning benefit structures with the evolving characteristics of the sector.

Regulatory framework for pension transactions

Pension plans are not ordinary assets: they comprise segregated funds and accrued rights held exclusively for participants and beneficiaries. Structural changes affecting sponsors may directly impact plan solvency and the protection of retirement income.

The regulatory framework has evolved to preserve plan solvency and member rights. PREVIC Resolution No 23/2023, as amended by Resolution No 26/2025, modernised the procedural framework for licensing proceedings involving closed pension entities and benefit plans. Key changes include:

• more detailed procedural rules;
• standardised filing requirements;
• clarified deadlines; and
• consolidated treatment of structural transactions.

The framework also requires feasibility studies for new benefit plans, including as a result of spin-offs of benefit plans and sponsor withdrawals, ensuring actuarial and financial sustainability before approval.

While these measures have improved consistency and predictability, they have also made licensing proceedings more document-intensive. Successful implementation now requires co-ordinated legal, actuarial, accounting and governance analyses from the earliest transaction stages, often extending timelines and increasing costs.

Sponsorship withdrawal and alternative restructuring mechanisms

Sponsorship withdrawal illustrates particularly well the complexity of pension-related corporate transactions. Unlike ordinary corporate exits, withdrawal of a sponsoring employer requires the prior settlement of a range of legal, actuarial and financial obligations intended to preserve the plan’s financial equilibrium and protect accrued participant rights.

Depending on the circumstances, the withdrawing sponsor may be required to fund differences between assets and liabilities, bear administrative costs associated with the transaction, finance specific longevity-related obligations and continue funding benefits that remain under its responsibility. These requirements mean that sponsorship withdrawal often involves significant actuarial modelling and financial planning before approval.

Recent regulatory developments have sought not only to strengthen participant protection during sponsorship withdrawals, but also to encourage the adoption of structural alternatives capable of preserving pension arrangements whenever feasible. In this regard, CNPC Resolution No 59/2023 introduced additional safeguards and mechanisms designed to facilitate the continuity of pension coverage following sponsorship withdrawal.

Within this framework, transactions such as plan mergers, spin-offs, incorporations, transfers of management and changes of sponsorship are increasingly viewed as preferable alternatives, allowing corporate reorganisations to be implemented while preserving the continuity, governance and financial stability of pension arrangements.

As corporate transactions grow in complexity, pension law has become an integral component of modern corporate practice in Brazil, requiring co-ordinated legal, actuarial and governance assessments from the earliest stages.

Increased Regulatory Scrutiny and Evolving Regulatory Framework

Regulatory scrutiny has intensified in recent years. Historically, supervisory activities focused on the largest and most systemically relevant pension funds. More recently, PREVIC and SUSEP have extended routine inspections to medium-sized and smaller entities, bringing the entire sector more firmly within their oversight framework.

Recent inspections have focused on several key areas, including:

• the documentation and recording of resolutions taken by the entity’s decision-making bodies;
• functional independence of directors and employees, and their compensation plans;
• the sharing of structure and personnel between sponsors and pension funds;
• transparency in communications with participants; and
• governance structure and independence in decision-making routines, particularly regarding investment decisions.

In parallel, regulators are also considering new rules to strengthen governance standards across the industry. Although some proposals are still under discussion, they indicate the regulators’ current priorities and the direction of future reforms.

PREVIC

A proposal to amend CNPC Resolution No 30/2018 is under consideration. The proposal seeks to modernise the framework governing the allocation of actuarial surpluses, deficit funding and technical-actuarial assumptions for closed pension funds. Key objectives include limiting the share of participant income committed to extraordinary contributions and ensuring that non-structural deficits do not automatically trigger mandatory deficit equalisation plans. The amendments would provide greater flexibility in funding management while preserving the long-term sustainability of pension plans.

Federal Decree No 4,942/2003, which governs the disciplinary regime for closed pension funds, is also under review. The proposed reforms aim to modernise and expand the enforcement framework, including potential increases in applicable penalties, particularly fines, while incorporating standards to protect well-informed and grounded decisions taken by directors from being penalised.

Other regulations are also under review, including rules governing director and officer certification and qualification, management transfers, sponsor debts owed to pension funds, and actuarial assumptions.

SUSEP

The open pension regulatory framework has recently been updated to make pension products more accessible, flexible and modern. These changes also addressed regulatory gaps to ensure that pension plans remain long-term retirement savings vehicles rather than short-term investment products.

New rules are also under consideration to revise the disciplinary regime applicable to insurers and open-end pension entities, including increased penalties and higher minimum and maximum fines. In addition, SUSEP is reviewing regulations on the use of pension mathematical reserves as collateral, transparency requirements for policy terms and product registration, and the open insurance framework.

Final Remarks

Brazil’s supplementary pension sector has reached institutional maturity, supported by a robust regulatory framework and ongoing normative developments. Recent reforms have modernised plan governance, pension transactions and supervisory practices, while new rules under consideration signal continued regulatory evolution when compared to other jurisdictions.

The sector has the ongoing challenge of expanding its reach across different segments of society, seeking to provide supplementary retirement income to workers, entrepreneurs and citizens. This broadening of access, combined with strengthened governance and participant protection, can foster continued growth and relevance for the Brazilian pension system in the years ahead, with it playing a key role in providing supplementary benefits and retirement for an ever-changing population.