SeLFIES Can Help Brazil Create a SUPER Supplementary Pension

Revista Brasileira de Previdência, 11ª edição – Primeiro Semestre I-2020

8 Pages Posted: 13 May 2020

See all articles by Arun Muralidhar

Arun Muralidhar

AlphaEngine Global Investment Solutions; George Washington University

Robert C. Merton

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER); Harvard Business School - Finance Unit

Alexandre Vitorino

Organizações e Sociedade

Date Written: April 18, 2020

Abstract

Brazilian policy makers and researchers have discussed the introduction of a complementary pension system to complement the Regime Geral de Previdência Social (RGPS), specially for those that want a retirement income above the RGPS ceiling. This article first recommends that the complementary system must be SUPER (Simple, Universal, Portable, Efficient with low cost and Robust Regulatation). It then proposes the adoption of a financial innovation called SeLFIES (Standard-of-Living, Forward-starting, Income-only Securities), as the default investment option for a modern capitalization regime. Brazil presents an interesting opportunity to be the first country to adopt and implement SeLFIES given the initial conditions, especially the innovations introduced in the market for government bonds. This financial innovation would help the Brazilian government address two challenges simultaneously: improve retirement security (by including even the most financially illiterate people and those in the informal sector in retirement plans) and boost infrastructure financing.

Keywords: Supplementary Pensions, SeLFIES, Social Security, Brazil, Financial Innovation, Pension Design

JEL Classification: G50, G51, G52, G53

Suggested Citation

Muralidhar, Arun and Merton, Robert C. and Vitorino, Alexandre, SeLFIES Can Help Brazil Create a SUPER Supplementary Pension (April 18, 2020). Revista Brasileira de Previdência, 11ª edição – Primeiro Semestre I-2020, Available at SSRN: https://ssrn.com/abstract=3579370

Arun Muralidhar (Contact Author)

AlphaEngine Global Investment Solutions ( email )

Great Falls, VA
United States

HOME PAGE: http://www.mcubeit.com

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

Robert C. Merton

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

77 Massachusetts Avenue
E62-634
Cambridge, MA 02139-4307
United States
617 715 4866 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6678 (Phone)

Alexandre Vitorino

Organizações e Sociedade ( email )

Rua Sena Madureira, 1500 - 5º andar
Vila Clementino
São Paulo, Sao Paulo 04021001
Brazil

HOME PAGE: http://dgp.cnpq.br/dgp/espelhogrupo/18565

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