The European Commission ruled out the scenario of collapse of Portuguese public pensions over the next few decades and ensured that the system remains sustainable until at least 2070. The conclusions are part of the Aging Report, the reference document that analyzes the impacts of aging on public spending and which includes a detailed 73-page analysis dedicated to Portugal.
According to the website, which specializes in economics, the report confirms that payments are guaranteed until the end of the projected horizon, leaving open what could happen after that date, since the European Union does not make projections beyond 45 years.
In the central scenario, the European Commission predicts that the system will begin to record deficits from 2034 onwards. However, according to the same source, these values should not exceed 0.6 percent of GDP, reaching a peak in 2045 and gradually decreasing in the following decade. From 2060 onwards, surpluses should return, helping to stabilize the system until 2070.
Current reserve ensures significant slack
The report highlights the role of the Social Security Financial Stabilization Fund. According to Economy and Finance, this fund already corresponds to around 15 percent of GDP, enough to support up to 25 years of deficits equivalent to the maximum projected value.
The European Commission emphasizes that Portugal will continue to accumulate surpluses until 2034, which will make it possible to further reinforce this reserve.
Even in the most pessimistic scenario presented, deficits remain within limits considered controllable. The document notes that, in an extreme situation in which all worker contributions disappear, the fund would be sufficient to pay two full years of pensions without additional support.
Aging expenses increase before falling again
The Aging Report indicates that Portugal will be one of the countries where aging will have the greatest impact on public spending by 2047, with an increase of 4.1 percentage points.
However, according to Economy and Finance, the trend reversed later, ending 2070 with a slightly lower weight than the current one.
Pension expenditure is expected to peak in 2046, representing 15.1 percent of GDP. After that, it will begin to fall, stabilizing at 10.4 percent in 2070. If this forecast is confirmed, final spending will be 1.8 percentage points lower than in 2022, reflecting a structural improvement.
The bad news: the retirement amount will represent less than the last salary
Despite financial sustainability, the European Commission warns of a fall in the replacement rate. According to Economy and Finance, this rate, currently at 67.3 percent, should rise temporarily until the 2040s, but will fall significantly to around 37 percent in the 2050s, stabilizing at that level.
The reason for this drop is essentially statistical: as Caixa Geral de Aposentações retirees leave the system, the average value of pensions approaches the contribution profile of those enrolled in Social Security, who have shorter careers and lower salaries.
Each worker will, however, continue to have an individual replacement rate depending on their own discounts and remuneration throughout their career.
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