How Brazil’s RendA Bond Could Render DC Retirement Risk Obsolete : A Case Study

At a 2019 retirement security conference in Brazil, one of the authors proposed that Brazil introduce a low-cost, low-risk, simple and liquid bond innovation: “SeLFIES”— Standard of Living indexed, Forward-starting, Income-only Securities. SeLFIES would serve as the relative safe asset for Defined Contribution (DC) retirement plans, thereby lowering DC retirement risk, especially in portfolios of uncovered and financially unsophisticated investors. Brazil was uniquely positioned globally to introduce SeLFIES/RendA+ (“Retirement Extra Income”) because Brazil has successfully implemented financial innovations such as Tesouro Direto, and has created a liquid, efficient, and long maturity IPCA-linked market. From the presentation of SeLFIES in November 2019 to the Brazilian Treasury launching RendA+ in January 2023 was a mere 1165 days. This paper presents some crucial steps in launching the first retail-targeted retirement bond in the world, the condition of the Treasury market in Brazil prior to introduction of the bond, main features of RendA+, results from the first month post launch, and next steps. The purpose of the paper is to serve as a case study for other countries considering the introduction of similar instruments to improve retirement security in DC plans