It is the third time since the presentation of the State Budget (OE) for next year that the government has allowed pensions to rise above the threshold between 4.43% and 3.35% in 2023, in case the annual inflation rate of 2022 exceeds the threshold of 2023. estimate of 7.4% exceeds . After recognizing him twice yesterday, the Minister of Finance, Fernando Medina, the Minister of Labor, Ana Mendes Godinho, reiterated the same position and showed that there is room for this, during a hearing in Parliament as part of the general discussion of the OE proposal for 2023.
In fact, the backlog translates into a 75% improvement in the pension system by 2023 and an increase in the annual profitability of the Social Security Financial Stabilization Fund (FEFSS) from 1.9% to 4%. On the other hand, there is even a risk that average annual inflation will exceed 7.4%, according to the executive’s estimate, or 7.8%, according to the Public Finance Council. For four consecutive months, between June and September, the consumer price index has been set at about 9%, up 9.3% last month, the highest value since 1992.
The price index has been around 9% for four months and reached 9.3% in September, the highest value since 1992.
Facing a high inflation scenario and based on the social security budget for 2023, the Minister of Labor ruled that “if necessary, the value of the pension increase in 2023 will be adjusted to ensure that the result of inflation in 2022 is fully fulfilled”.
In fact, and by law, the pensions of Social Security (about 2.9 million) and of Caixa Geral de Aposentações (about 650 thousand) must be updated next year by between 8% and 7.1%. The reduction to almost half was in return the management found for the bonus of more half-pension that was paid this month to all pensioners with monthly installments of up to 5318.4 euros, in the context of the extraordinary support for families to avoid the effects of inflation. to soften.
In September, the Department of Labor raised the risk of social security sustainability to justify this cut in pensions. In a document sent to parliament at the time, the guardianship showed that the full application of the formula for increasing pensions would require 13 years of social security life. However, the forecasts were outdated. Ana Mendes Godinho clarified yesterday that “the simulation for updating the pensions has been created on the assumptions of the 2022 state budget and which had just been approved, on the assumptions of income and expenditure as foreseen in the state budget for 2022”.
It appears that the fall in unemployment and the increase in wages have led to an improvement in the balance of the social security system. “Due to employment and the increase in wages, income, premiums will increase by 10% in 2023 compared to the forecast in 2022”, which in combination with “the cut in unemployment benefit expenditure by 20%” is a increase of 75% of the social security balance” of social security, the minister stated. In fact, the OE proposal for 2023 shows that the pension system will have a budget surplus of 3.1 billion next year.
The medium-term income improvement agreement between the government, UGT and employers’ confederations will also play an important role in the sustainability of social security. Ana Mendes Godinho stated that this is “a commitment to the evolution of salaries and contributions that will allow, in accumulated terms, an increase of more than 50% in social security contributions until 2026. She added: “The agreement translates the realization of an increase in the minimum wage of 78% or from 505 euros in 2015 to 900 euros in 2026, which guarantees that these increases are always above expected inflation until 2026.”
In the OE for 2023, the outlook for the FEFSS, which serves as a backup cushion to pay out pensions, is also encouraging. According to the official, “the FEFSS’s annual return calculated in the 2022 assumptions was 1.9%, but at the moment the expected annual return is 4% and this changes the calculations”. Ana Mendes Godinho explains that “the big difference has to do with the fact that 50% of the fund’s investments are in sovereign debt, which has undergone a very positive evolution in terms of maturity”. In fact, the official emphasizes, “80% of revenues come from investments in government debt”. According to OE2023, the FEFSS will not only not be extinguished in 2060, as predicted by the government, but will be strengthened for 38 years from now by 34.3 billion euros, which is 7.8 billion more than expected for 2023.
Salomé Pinto is a journalist for Dinheiro Vivo
Source: DN
