‘Work until 69 before pensions are paid’ – states latest report
A study presented this Friday, argues that the retirement age in Portugal will have to increase by three years, to 69-years-old, to ensure the sustainability of the pension system.
Given the demographic and macroeconomic scenario, the study published by the Francisco Manuel dos Santos Foundation, predicts that the number of pensioners is expected to grow from 2.7 million to 3.3 million between 2020 and 2045.
This means the retirement age needs to increase to avoid transfers of money from the general State budget.
“Increasing the retirement age seems to be the most effective way to reduce the need to fund the system through transfers from the State Budget,” concluded the researchers.
In the study on the ‘Sustainability of the Portuguese Pension System’ collated by the Institute of Social Sciences of the University of Lisbon for the Foundation, the researchers said the facts are incontrovertible and are rooted in a demographic evolution.
Given the real prospect of a reduction of 23% in the population of Portugal in the next 50 years, the authors predict that the number of workers will drop by 37% between 2020 and 2070, which will “decisively limit” the growth potential of the Portuguese economy in the same period.
Despite the fall in the number of workers, the study predicts that the value of Social Security contributions will grow slightly in the period under review, from 8.1% of GDP to 8.7%.
But this is not enough, “This slight increase in contributions will not be sufficient to compensate for the increase in pension expenditure under the Social Security Welfare Regime, which will start to register chronic deficits as from 2027,” the document states.
The situation will get worse if productivity and wages do not grow at the pace predicted by the European Commission in its macroeconomic scenario.
The researchers also predict a deterioration in the value of pensions compared to wages, which will contribute to raising the poverty rate among pensioners.
The authors of the study looked at reforms needed and suggested increasing workers’ and employers’ contributions to the social security fund, dropping pension levels and transferring money from the State budget each year.