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Portugal's Pension System

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Nina Hedderich

on 28 November 2012

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Transcript of Portugal's Pension System

Workers Money in Money Out Problem? Working Population

Poverty in old age 30%

Unemployment Rate 15,8%

Parallel Economy

Retired People + Insured People



Possible Solutions Rise retirement age to 68 years

Private pension System

Incentives for longer working period

Incentives for the development of supplementary pensions

Portugal's Pension System The Process: Every Worker (Public, Private or Independente) has to pay part of his montlhy salary to the Portuguese Social System What Happens to the money? It is kept in this institution until the worker reaches it reforming age and can start to receive a monthly income according to what he has paid through out his working life 65 years How much exactly do they pay? 34,75% 11% 23,75% worker company You have special fares if you're:

Public Worker


Police or military

Accountant What does it cover? 16,01% - old age insurance

3,42% - invalidity insurance*

3,67% - survival insurance * also pregnancy or temporary serious disease Independente worker Pays 25,4 % 11,2% do GDP

Pension Fund market is practically inactive

Not enough fiscal incentives --> promote new professional regimes

Liquidation of many pension funds
Reduction in number of workers in different sectors ,
Pensioners of the social pension are entitled to receive the Solidarity ExtraSupplement on top of their pension. The monthly amount of this benefit is EUR 16.83 forthose under 70 years old and EUR 33.65 for those with at least 70 years of age.The Solidarity Supplement for the Elderly (SSE), the main targeted benefit aimed atfighting poverty among the elderly, came into full effect in 2008 by extending eligibility topeople aged 65 or older.

Additional eligibility conditions for this benefit are: receivingold-age or survivors’ pension (national citizens not entitled to the social pension becausethey do not fulfil its means test may also be eligible); and fulfilling the SSE means test.
The SSE resembles the Social Insertion Income as it is a supplement equal to thedifference between the beneficiary’s income and a given threshold, which is at the sametime the means test condition. The SSE is therefore equal to the difference between thebeneficiary’s income and the following Reference Amounts (RA): EUR 4 800 per year for singles. EUR 8 400 per year for couples. Thank you for your attention! Nina Hedderich Macroeconomics

28 November 2012 References:



http://ec.europa.eu/employment_social/social_protection/docs/2006/portugal_pt.pdf 1 st 55 years
30 years of contribution How is it calculated? Pension = reference earning * accrual rate * sustainability factor
amount The Pension Amont 15 - 65 years Measures for the equilibrium of the SSS Portugal's population is aging at a higher rhythm than most EU countries

Old age 2004 2030 2050
dependence 25% 39% 58%

Spending 11,1% -----> 20,8%
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