Old-age pensions are heavily penalized and amount to only 38% of salary over 48 years.

Old-age pensions are heavily penalized and amount to only 38% of salary over 48 years.

The value of the average pension will decline sharply over the next 48 years, as much as we already have from democracy, if the pension payment system does not undergo a major reform. In 2070, the average pension could be worth just 38% of the average salary. The conclusion is in the book “Ambition: Doubling GDP in 20 Years” by the Association for Economic and Social Development (SEDES) to which DN/Dinheiro Vivo had access. The work, coordinated by the president of the association, Álvaro Beleza, and by the chairman of the advisory board of the same institution, Abel Mateus, will be launched today in Porto.

In 48 years an employee with an average monthly salary of 2571 euros, in 14 months, will only receive a benefit of 1005 euros, which amounts to only 38% of the wages he earned. If these forecasts from the working group coordinated by Maria João Louro come true, this will mean a significant loss of purchasing power for these pensioners by 2070. At the moment, and in light of the 2019 accounts, the difference is smaller. For example, if you earn 1285 euros per month, for 14 months, and if you apply for a pension, you can count on a pension of 950 euros, or 72% of your salary.

From 2019 to 2070, experts emphasize that, despite the doubling of the average salary from 18 thousand euros to 36 thousand euros, the average pension in real terms only increases by 11% from 13.3 thousand to 14.76 thousand euros. It is also estimated that the retirement age will increase from 66 to 69 in 2070.

The projections take into account slow growth in Gross Domestic Product (GDP) and a sharp deterioration in the dependency rate, which measures the ratio of the over-65s to the population aged 15-64. “In such a way that by 2050 Portugal will have the highest dependency rate, comparable to Spain, on the countries of the European Union (EU),” the work explains.

“The demographic evolution combined with slow growth in potential GDP, about 1% per year, well below the EU average, has devastating consequences for the lack of progress in the Portuguese economy and in particular for the pension reform system. warn the experts.
The main consequence, in Portugal, will be the sharp reduction in the pension replacement rate in relation to final salaries. In Portugal, this ratio drops from 74% in 2019 to 41% in 2070. The 33% drop is surpassed only by Spain (36%) and Latvia (35%).

The work also cites the scenario carried out by the Portuguese Association of Investment, Pension and Heritage Funds (APFIPP). Taking into account relatively positive variables – such as an average annual GDP of 1.7%, an average unemployment rate of 8%, an annual labor productivity increase of 1.4% and an annual inflation of 2% – the APFIPP, nevertheless, estimates that “the pension deficit before retirement from the premium system will worsen in the coming years, leaving a budget deficit of more than 5% of GDP until 2046″. “If we add to these figures those of social pensions, which represent a deficit of 1.6% of GDP, it means that the primary balance of the state budget needed just to make up for the deficit of social security pensions, no less than 8% of GDP between 2021 and 2036”. APFIPP warns that this “seems to be a very difficult goal to aim for.”