Interim increase gives pensioners up to 200 euros extra

The interim increase in old age and disability pensions of 3.57% over the December figure, i.e. without the January update, arrives in the pockets of Social Security retirees this Monday, July 10, representing an increase of between 10 euros, for the lowest installments, and 200 euros, for the highest amounts, according to Dinheiro Vivo’s accounts. Pensioners of the civil service who have paid for the Caixa Geral de Aposentação (CGA) will receive it on July 19.

The 3.57% increase is the same percentage for everyone, as long as they earn a pension of up to €5,765.16 by December 2022, equivalent to 12 times the Social Support Index (IAS), which stands at €480.43. But given that this increase is calculated based on last year’s installments, which are lower because they didn’t actually benefit from the January update, and given the pension paid, the increase will be slightly lower at this point, from about 3, 4%. And there are minimums, in absolute terms, that must be met, according to Regulation No. 172/2023 of June 23 that regulates this measure. For example, the increase for pensions equal to or less than EUR 960.86 (2 IAS) cannot be less than EUR 9.93; for installments above 960.86 euros (2 IAS) and up to 2882.58 euros (6 IAS), the increase is at least 34.30 euros; and retirements over 2882.58 euros (6 IAS) and up to 5765.16 euros (12 IAS) receive a minimum increase of 102.91 euros.

Exceptionally, those who retired in 2022 will also be entitled to this increase, despite the law that excludes these pensioners. That is, as a rule, only those who retired more than a year ago, before January, benefit from the regular update.

An average pension earns 19.6 euros more

Based on the extra increase, a pensioner who earned 300 euros per month in December will receive an extra 10.17 euros. An average pension of 550 euros will receive an increase of 19.6 euros; a gross installment amount of 1300 euros is increased by 46.41 euros; and a pensioner who received 5,600 euros earns another 199.92, according to DV calculations.

The cabinet has decided to attribute this interim increase to compensation for the reduction of the regular January update in exchange for the half-board supplement paid in October. That is, in January, retirees should have been increased by 8.4%, 8.06% and 7.46% and instead received an update of 4.83%, 4.49% and 3.89% for the three pension levels. This additional increase restores the formula of the Social Security Basic Law, which prescribes that the update must take into account the average annual inflation calculated in November of the previous year (7.8%) and the average evolution of the GDP growth over the past year. two years (5.85%). The correction of the pension base, for the full application of the calculation provided for in the law, should cost about one billion euros in 2024, i.e. taking into account a full year of application.

In fact, if we add the October half board supplement to the two increases, in January and now in July, retirees will see an increase of between 10.19%, in the lowest amounts, and 9.25%, in the highest installments, which is the inflation, which translates into an effective purchasing power gain of approximately 2%.

Holiday money and Christmas money

The normal holiday allowance, i.e. without the reflection of this extraordinary update, will also be paid to Social Security (SS) retirees on Monday and to CGA retirees on July 19. Only at the end of the year, at the time of the Christmas allowance – in November for the SS and in December for the CGA – pensioners are entitled to half of the interim increase, as it also only applies to the last six months. This means that the increase in those supports will be 1.785% and not 3.57%.

Relief from the IRS’s withholding rates provides more liquidity

Social Security pensioners will be the first to feel the reduction in withholding tax due to the application of the new IRS tables that came into force on 1 July. That means they have more money at the end of the month, not only because of the interim increase, but also because of the reduction in the tax advance that has to be paid to the Treasury. It should be noted, however, that the exemption ceiling has fallen from EUR 762 to EUR 765 per month.

To determine how much income pensioners will have at the end of the month, the DV made a simulation for a gross monthly income of 1300 euros. In the example, the meal allowance or the holiday allowance do not count, because they are taxed separately and do not count for the determination of the withholding percentage from the benefit.

So an unmarried pensioner without children who receives 1300 euros receives an interim increase of 3.4%, since the current value is considered and not that of December, which is lower, that is 44 more, 2 euros per month, in total 1344 .2 euros gross. According to the June IRS tables, this retiree would deduct 202.97 euros, leaving him with a net monthly income of 1141.23 euros. When applying the new regime, the retention drops to 169.1 euros, which results in a reform of 1175.1 euros: that is another 33.87 euros at the end of the month.

IRS rebates are advances employees pay to the state in connection with tax due in the following year. A higher retention does not mean an increase in the tax burden. That is, those who give a higher discount now can get a larger amount back later. Retirees and employees who withhold less may receive or even have to pay less tax.

Salomé Pinto is a journalist for Dinheiro Vivo