SAO PAULO (Reuters) – The Brazilian government’s proposed social security reform will introduce individual contributions into private funds to ensure the pensions of future generations and help boost growth, Presidential Chief-of-Staff Onyx Lorenzoni said on Wednesday.

Including a “capitalization system” in a proposal to be sent to Congress in February will boost internal savings and spur economic growth by at least 3 percent a year, he said.

Such a system would have private pension funds fed by individual defined contributions to eventually replace the current public system based on a guaranteed package of retirement benefits.

Overhaul of Brazil’s costly state pension system, or social security, is a top priority for Brazil’s new President Jair Bolsonaro, because it is the main cause of chronic budget deficits and a mounting and unsustainable public debt.

The government is determined to send a complete pension reform proposal to Congress rather than partial reforms, to ensure that the benefits last longer, Lorenzoni said.

“We will fix this sinking ship called the pension system which has a hole on its hull,” he said in a radio interview.

The aim is to overhaul the pension system so it does not need to be reformed again for the next 20 or 30 years, he said.

Lorenzoni said no decisions have been made and new proposals will be presented to Bolsonaro next week.

While few details have been made public, Brazil is expected to follow the example of Chile’s privatization of social security introduced in the 1980s under dictator Augusto Pinochet that boosted savings and added liquidity to the stock market.

The highly privatized Chilean pension system has been widely imitated around the world.

Pensions in Chile are currently managed by six powerful private fund administrators, known as AFPs, holding nearly $200 billion in assets. These pensions have often fallen short of expectations, prompting angry protests in recent years by Chileans saying they have been short-changed.

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