The future of pensions continues to be one of the topics that raises the most doubts among the Portuguese, especially at a time when the aging population puts pressure on public systems. The most recent forecasts help to clarify the scenario, although they leave some questions open.
According to the website, which specializes in these same topics, the European Commission updated its projections on the Portuguese pension system in the most recent Aging Report, a document that analyzes the impact of aging on public spending over the coming decades. The conclusions rule out, for now, a rupture scenario.
According to the same source, the Portuguese system remains sustainable within the analyzed horizon, although with relevant challenges in the medium and long term.
The European Commission indicates that the payment of pensions is guaranteed until at least 2070, which corresponds to the time limit of the projections currently made. As of that date, there are no official forecasts, which prevents a longer reading of the system.
This situation means that, within the next few decades, an abrupt drop in pension payments is not at stake. Still, the evolution of the system will depend on several factors, such as economic growth, employment and demographics.
Expected deficits, but considered controllable
Despite global sustainability, the report anticipates the possibility of deficits emerging from 2034 onwards. In the central scenario, these values should remain relatively low.
Deficits could peak around 2045, but not exceed about 0.6 percent of GDP. After this period, the trend should reverse, with a gradual recovery.
From 2060 onwards, the data points to a return to surpluses, which contributes to stabilizing the system until the end of the analyzed horizon.
Reserve fund gives margin to the system
One of the elements highlighted in the report is the role of the Pension Financial Stabilization Fund. This mechanism works as a reserve to face possible imbalances.
According to the same publication, the fund already represents around 15 percent of GDP, which gives it the capacity to support several years of deficits within projected values.
Furthermore, until 2034, Portugal must continue to record surpluses, which will make it possible to further reinforce this reserve.
Aging weighs heavily, but trends can reverse
The impact of population aging will be more significant in the coming decades. The report indicates that public expenditure associated with this phenomenon is expected to increase until mid-century.
The peak point should be reached around 2046, when pension spending could represent around 15.1 percent of GDP. From then on, the trend will be a gradual decline.
In 2070, the weight of pensions in the economy should be lower than today, reflecting an adaptation of the system to the new demographic context.
Pensions may represent less than salary
Despite financial sustainability, there is one fact that deserves attention. The replacement rate, which indicates the relationship between the pension and the last salary, should decrease over time.
Currently, it is around 67 percent, but could fall to close to 37 percent from the 2050s onwards. This evolution is linked to changes in the contributory profile of workers.
According to the same source, the progressive exit of beneficiaries from older schemes, such as Caixa Geral de Aposentações, contributes to this reduction.
Final value depends on the contribution path
Even so, the value of the pension will continue to depend on the individual history of deductions. Longer, higher-paying careers tend to result in higher benefits.
The system thus maintains a relevant contributory component, even in a context of structural adjustment.
According to Economy and Finance, the report points to a system that, although sustainable, may require greater individual planning on the part of future retirees.
Read also: The European Union clarifies how long pensions are guaranteed in Portugal and there is one detail that may cause concern. See what changes in the reforms.
