The government is expected to increase pensions by another four-tenths in 2023, representing an increase of between €1 and €23 for the 2.7 million Social Security and Caixa Geral de Aposentação (CGA) retirees. An increase that will be applied due to an increase in inflation and GDP above government forecasts, according to calculations by DN/Dinheiro Vivo based on estimates released this Wednesday by the National Statistics Institute (INE).
The formula for updating pensions takes into account two indicators: the average annual inflation recorded in November and the average GDP growth over the last two years. Taking into account that the price index change, excluding housing, was 7.46%, which exceeded the executive’s projections of 7.1%, and that the indicator measuring wealth in 2021 and 2022 was 4.78 %, above the estimate of 4.5%, it is almost certain that the increase in renovations will be higher, as Dinheiro Vivo had already progressed. However, it should be taken into account that the final data on the price increase index, excluding housing, will not be published by INE until December 14.
If these projections are confirmed, it is almost certain that the government will review the pensions update, not only because it has already said so several times, either through Finance Minister Fernando Medina or Labor Minister Ana Mendes Godinho, but also because a proposal has been approved to adjust the PS on the state budget for 2023, allowing the executive to adjust the rise in reforms to inflation and GDP.
Looking at the formula for calculating pensions, if the average growth of GDP over the last two years exceeds 3%, which is the case, pensions up to 957.4 euros (twice the Social Support Index, which will reach 2023 at 478.7 will stand). euro), an increase corresponding to the sum of inflation (7.46%) and 20% of GDP (0.956%) is applied, giving an increase of 8.42%, above 8%, according to the original formula dating back to José Vieira da Silva’s law of 2006. In other words, about four-tenths more than expected.
And the same applies to the rules for updating the remaining levels. The increase in pensions between EUR 957.4 and EUR 2872.2 (six times the IAS) would then be 8.06% instead of 7.66%, applying the inflation value plus 12.5% of GDP ( 0.5975%). And finally, installments between 2872.2 euros and 5744.4 euros (12 times the IAS) would have an increase identical to inflation, namely 7.46%, instead of the 7.1% imposed by the executive. was predicted.
As it turns out, the government decided to tear up this formula when it brought forward half-board in October. In the executive’s new accounts, this bonus, which was just an advance on the 2023 increase, now counts towards the global update. So, and this part aside, the update was no longer between 8% and 7.1%, but varied between 4.43% and 3.53%, meaning a permanent discount for future increases in pensions from 2024 onwards.
Based on the new update of the reforms, published by decree-law, and adding four tenths, due to a stronger increase in inflation and GDP, we arrive at increases between 4.83% and 3.93%. Installments up to 957.4 euros (double the IAS) will receive an increase of 4.83% instead of 4.43%, ie an increase of 46 euros at the most, four euros more than expected. For the minimum pensions, which amount to 278 euros, the increase will be 13 euros, which is one euro more than what is stipulated in the government’s transitional regime.
Reforms above 957.4 euros (twice the IAS) and up to 2872.2 euros (six times the IAS) will increase by 4.47% instead of the 4.07% predicted by the executive. Dinheiro Vivo has also made some simulations in this range of values: a pension of 960 euros will receive an increase of 43 euros, four euros more than expected; a term of 2872.2 euros should increase by 128 euros, 11 euros more compared to the government regime.
Pensioners who receive between EUR 2872.2 and EUR 5744.4 (12 times the IAS) will also receive an update on top of that calculated by the executive: it will be 3.93% and not 3.53%. For example, a renovation of 2880 euros should increase 113 euros, 11 euros more than in the current formula, and a term of 5744.4 euros, the ceiling from which there are no increases, will increase 225 euros, another 23 euros.
Dinheiro Vivo asked the Ministries of Labor and Finance if they would update pensions by four-tenths and the IAS from 8% to 8.4% to accommodate inflation and GDP growth, but we still received no response.
IAS could rise to 480.4 euros
The IAS follows the rule for discounting the first pension tier: inflation plus 20% of GDP growth. In this case, adding the four-tenths, this indicator should increase by 8.4% and not by 8%, which would amount to EUR 480.4, an increase of EUR 1.70 compared to the EUR 478.7 euro that was announced by the executive and reflected in the 2023 National Budget.
Various social benefits depend on the IAS, such as the minimum and maximum amount of unemployment benefit, the amount of social unemployment benefit, the update levels of various benefits such as child benefit and pensions.
The Department of Labor had already assured that it will also update the IAS under the legal conditions. Therefore, if the indicators now available are confirmed, this index could rise by about 8.4% instead of the announced 8%, to EUR 481.09 in 2023.
The Social Insertion Income (RSI) should also be updated according to the IAS, but has been frozen at 189.66 euros for the last three years. However, the ministry under the supervision of Ana Mendes Godinho has submitted to Jornal de Negócios that “Social Insertion Income will be updated by regulation in accordance with the valuation of the IAS”. This means that the RSI could rise by 8.4% to EUR 205.59.
Source: DN
