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New rules for pensions
• 13 Jun 2007 •
 THE government has introduced changes to pensions and early retirement. Due to increased life expectancy, the government said it was necessary to initiate a sustainability factor which would guarantee the pension system in Portugal did not collapse in the near future.
With the new system, which was introduced this month, projections show that future pensioners will receive lower pensions. A study carried out by the Society for Pension Fund Management reveals that by 2030 someone retiring after 40 years of activity will receive 50.2 per cent of their last salary. According to the OECD, with the old system, an average earner in Portugal could expect a net replacement rate of 113 per cent, meaning that net income in retirement for a full-career worker would exceed net earnings when working.
“The pension reform has therefore reduced benefits to a much more sustainable level. It is difficult to believe that it would have been possible to maintain benefits at the pre- reform level without fiscal meltdown,” stated Vieira da Silva, Minister for Labour and Social Solidarity.
To make up for their loss in earnings, employees have now two solutions: to work longer or to invest in pension funds. Employees can still ask to take early retirement, but for each year they anticipate their retirement, they lose six per cent of their salary. Portugal is one of only three OECD countries to allow early retirement on an old-age pension before age 60. To qualify, workers must have at least 30 years’ social security contributions. |  Return to Top
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