Those who retire in 2070 in 48 years run the risk of losing more than half of their salary to the pension they receive, according to a study by the Nova School of Business and Economics presented yesterday at the annual conference. of the Insurance and Pension Funds Supervision Board (ASF). For example, if an employee retires in 2070 with a salary of EUR 2,000, he will only be entitled to 46% of his last salary, ie EUR 920.
Current pensions even approach the value of the last salary received. In 2019, the salary replacement rate for retirement was 79% according to the same study. That is, for a salary of 2,000 euros, the employee receives 1,580 euros in pension. But for 48 years the estimates are much darker, pointing to a reduction of 33 points, from 79% to 46%, the third largest decline in Europe, just behind Spain and Latvia. The decrease in the replacement rate in the EU27 average is nine points between 2022 and 2070.
In the long term, the State will not be able to compensate for the widening gap between wages and pensions as the years go by. This means that the social security cuts or Caixa Geral de Aposentação, in the case of civil servants, will not be enough to pay pensions equal to the income of the employees. Given these projections, the question arises of how much the Portuguese are saving for their reforms and the outlook is not encouraging.
Only 42.7% of Portuguese say they save part of their income to supplement their retirement, according to a survey coordinated by the University of Minho and also presented at ASF’s annual conference yesterday. The biggest incentive to save for retirement is the prediction of a drop in income in the future, with 54% of respondents citing this reason. 14% fear worsening healthcare costs; 12% plan to save to have extra income for travel or other leisure activities; and saving 9% to meet rising costs at nursing homes or residences.
If we now analyze the application of pension savings, it appears that only 13% of the Portuguese opt for additional mechanisms such as pension savings plans (PPR). Most (26%) of respondents prefer to invest in stocks and 18% have their money in time deposits, which have yielded very low returns in recent years due to negative interest rates. This situation persists despite the staggering rise in Euribor rates, as banks have resisted raising interest rates on deposits rather than loans.
Teixeira dos Santos champions tax incentives to encourage companies to create employee savings plans.
Faced with reduced retirement savings and the inability of the public system to guarantee benefits equivalent to salaries, former socialist finance minister Fernando Teixeira dos Santos defends the introduction of savings plans in companies to supplement employees’ pensions. “The existence of a business plan that fits people into this pillar of savings is fundamental,” the former governor said at ASF’s annual conference. For this, he stressed, “it is necessary to see how it is possible to generate the best incentives so that companies are inclined to go ahead with this type of plan”. Teixeira dos Santos noted that “there is already a perception that the replacement rate” of the pension amount compared to the last salary “is not 100%”. However, he noted that “many people still live under the illusion” that the pension will be equal to the salary. “As the demographic trend is inescapable, the situation will get worse and the sustainability factor in the calculation of pensions will decrease over time,” he concluded.
Salomé Pinto is a journalist for Dinheiro Vivo
Source: DN
