Portugal’s pension system needs to prepare for rapid population ageing

elderly 2019

(Unsplash)

This article is brought to you in association with OECD.


Portugal needs to reform its pensions system to address the challenges of a fast-shrinking workforce and high levels of old-age inequality, according to a new OECD report.

The OECD Reviews of Pension Systems: Portugal says the country’s rapidly ageing population, a result of low fertility and rising life expectancy, is putting pressure on pension finances. The total population recently started to shrink and is projected to fall below 9 million by 2050 from a peak of 10.7 million in 2009, due to a sharp decrease in the number of young people and working-age adults.

The working-age population decline will be among the steepest among OECD countries, with the number of 20-64 year-olds set to fall by 30% by 2050 compared with an average drop of 5% on average in the OECD area. There will be 7 people older than 65 years for 10 people of working-age in 2050, against slightly more than 1 in 3 now and 1 in 5 in 1975. This could have a major impact on the labour market, economic growth and pension finances, according to the report.

“Portugal has profoundly reformed its pension system over the past decades and made it more financially sustainable,” said Stefano Scarpetta, OECD Director for Employment, Labour and Social Affairs, launching the report in Lisbon with Portugal’s Minister of Labour, Solidarity and Social Security, José António Vieira da Silva. “Now the focus should be on strengthening the incentives and ability of older people to stay longer in the labour market, simplifying the old-age safety-net and pension system, and improving its design to better cope with longer lives.”

Recent major pension reforms in Portugal have included aligning the retirement age between women and men; linking the retirement age to life expectancy; increasing the period to calculate the reference wage; and gradually integrating the scheme for civil servants with the general regime. However, the current pension system can still be improved.

Income inequality among older people is high in Portugal, even though safety-net provisions reduce the risk of old-age poverty, which is below the OECD average. However, access to these provisions is not always straightforward. Administrative complexity generates costs and contributes to long waiting times, and some people may be discouraged to apply for benefits. At the same time, non-contributory benefits should be simplified to avoid the multiplication of instruments with similar objectives. In particular, the old-age social pension, the complement (CES), and the top-up (CSI) should be merged while the CSI’s means testing to children’s income should be removed.

The current link between the statutory retirement age and changes in life expectancy is needed to ensure the financial sustainability of pension systems. That link should be extended to the minimum age of early retirement. Moreover, while longer working lives should be encouraged, the sustainability factor, which was reformed in 2014, only generates a very large penalty in case of early retirement. While appropriate financial penalties for early retirement are needed, the sustainability factor should rather be used to adjust pension benefits across the board as an ultimate instrument to ensure financial sustainability.

Incentives to contribute to voluntary pension schemes should also be improved and occupational plans promoted to increase coverage. Pension fund regulation should be enhanced.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

G20 LIVE: World Leaders in Turkey for G20 Summit. Global Economy will be discussed in Antalya

How Japan became the world leader in floating solar power

“Who do I call if I want to call Europe?” Finally a name and a number to answer Henry Kissinger’s question

The horrific trend of the anti-vaccine movement in Turkey

Guatemala Dos Erres massacre conviction welcomed by UN human rights office

Assault on key Yemeni port would endanger 300,000 children and ‘choke off’ aid for millions more: UNICEF chief

Commission takes further action to ensure professionals can fully benefit from the Single Market

Foreign Investment Screening: new European framework to enter into force in April 2019

How China raised the stakes for electric vehicles

Copyright: MEPs update rules for the digital age

‘Global clarion call’ for youth to shape efforts to forge peace in the most dangerous combat zones

These are the world’s most fragile states in 2019

The importance of collaboration in the digital economy

Why strive for Industry 4.0

Public opinion misled by the Commission on air transport safety

Here’s how to make ‘value-based healthcare’ a reality

MEPs want to ensure sufficient funding for Connecting Europe’s future

Is this the way to finally beat corruption?

EU labour mobility: Inconvenient truths for everybody

Catalonia’s vote for independence and the power of symbols

Fighting crime: faster EU-wide exchange of non-EU nationals’ criminal records

The Stray

Seize the opportunities of digital technology to improve well-being but also address the risks

Are you breathing plastic air at home? Here’s how microplastics are polluting our lungs

“16+1” Cooperation injects new vigor into China-Europe cooperation

Rising human trafficking takes on ‘horrific dimensions’: almost a third of victims are children

Food for millions in Yemen at risk of rotting in key Red Sea port, warns UN

A backbencher Tory MP threatens both EU and UK with a no-deal Brexit

ECB money bonanza not enough to revive euro area, Germany longs to rule with stagnation

Civil society groups matter for Cambodia’s sustainable development: UN expert

India’s future as a world power depends on 4 key relationships

Future of EU farming: MEPs push for modern common policy with fair funding

The impact of mobile and rapid digital adoption on how India consumes

A new catastrophic phase in the Syrian carnage

Youth Internationalization: part of everyday life in JADE

Fears for food security and the future of farming families, as Fall Armyworm spreads to Asia

DR Congo: ‘New waves of violence’ likely, UN warns, unless State acts to prevent intercommunal reprisals

The European Sting Cookie Policy

The EU Parliament unanimously rejects Commission’s ideas about ‘seeds’

FROM THE FIELD: Green shoots of peace in South Sudan

Will Brexit shatter the EU or is it still too early to predict?

Financing the 2030 Agenda: What is it and why is it important?

There are now four competing visions of the internet. How should they be governed?

5 ways governments can unleash the power of young entrepreneurs

Do you dare to go to China?

Mali not fulfilling its ‘sovereign role’ in protecting its people: UN human rights expert

Corruption In The Balkans Is Impeding EU Membership

UN recognises role of sport in achieving sustainable development

A Sting Exclusive: “The challenge of Society’s digital transformation”, Spanish Minister of Spain for Industry, Energy and Tourism José Manuel Soria live from European Business Summit 2015

EU makes key TTIP document public as protests get louder

EU Commission – US hasten talks to avoid NGO reactions on free trade agreement

Banks get trillions and the unemployed ECB’s love…

Chile ups foreign bribery enforcement but flawed case resolutions are insufficient to ensure transparency and accountability

These coastal countries are sinking the fastest

Youth unemployment: think out of the box

Gender minority and health sector: promoting mental health with better medical education

Commission presents far-reaching anti-tax evasion measures

Don’t compare data to oil – digitization needs a new mindset

Commission’s action plan: financial world mandatory links to environmental targets

Civilians ‘continue to pay highest price’ in Ukraine conflict, with peace prospects losing ‘momentum’

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s