The European Commission today launched a warning to European Union (EU) countries about the need to adapt their respective pension systems, defending the promotion of supplementary pensions, such as retirement insurance and PPR, which continue to have little expression in Portugal. The proposal comes at a time when population aging and the instability of contributory careers raise doubts about the future sustainability of the reforms.
In a statement released this Thursday, the community executive announced a set of measures designed to help citizens guarantee adequate income in retirement. He explains that the objective is to reinforce access to “better quality” supplementary pensions, stressing that these do not replace public pensions, but should “complement the basis of national systems”.
The Commission argues that stronger complementary systems can also contribute to European economic growth by channeling long-term savings into productive investments.
In view of this, Brussels justifies the need to adapt to “demographic changes and the current dynamics of the labor market”, factors that put existing protection models under pressure.
Portugal among the countries with the lowest membership
The Portuguese system depends mainly on the public Social Security pension and faces, like several EU countries, challenges related to the rapid aging of the population, potentially lower future pensions and a low take-up of complementary plans, according to the digital portal specializing in economics and business Executive Digest.
Irregular contributory careers, common among self-employed workers and in professions marked by precariousness, worsen the situation.
To counter this trend, Brussels suggests that Portugal move towards a model of automatic enrollment in complementary plans, with a free exit option. In practice, this would imply that companies would make these plans available and that workers would deduct small percentages of their salary into these funds.
Towards more transparent systems
The Commission also proposes that each country has a system that allows citizens to consult all their pension rights in a single space. In the Portuguese case, it would mean integrating, in a single register, the rights acquired in Social Security, professional funds, private plans and PPR.
The objective, according to the same source, is to ensure greater transparency, especially for those who worked in several EU countries, allowing them to view accumulated rights and future projections in a centralized manner.
Reinforcement of professional funds
Brussels also wants to reform occupational pension funds, which in Portugal are scarce and small. The proposed changes include greater consolidation, more diversified investments and less bureaucracy, in an attempt to encourage large companies to create more competitive plans.
The Commission also considers it necessary to make access to the Pan-European Personal Pension, currently little used, simpler and cheaper, so that it is a more attractive alternative to traditional PPRs, including in tax matters.
Measures aimed at young people and self-employed workers
In the package presented today, the EU also clarifies the prudent investor principle, making it easier for pension funds to invest more in shares, which are historically more profitable. With these proposals, Brussels intends for younger workers to automatically enter complementary systems and for self-employed workers to have simpler and more accessible products, the same source also says.
These measures also seek to combat persistent inequalities, such as the average 24.5% difference in pensions between men and women in the EU.
The process now continues for approval
It will be up to the European Parliament and the Council to follow up on the proposals, negotiating the changes and setting the final terms of the legislative package. If approved, according to and , these measures could significantly change the way in which European citizens, and in particular Portuguese citizens, build their future retirement.
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