Only those who retired at least one year ago are entitled to the annual pension update, between 4.83% and 3.89%, which was already paid to Social Security retirees on the 9th and will be paid on the 19th. transferred to Caixa pensioners General pension. Everyone who retired at the beginning of January 2022, i.e. also on 1 January, will have their benefits frozen this year. This represents a loss of up to 12%, on top of the effect of the price increase in 2022 and 2023. For example, the minimum pension of the social security system, of EUR 278.05, could have a cumulative annual real loss of EUR 467.12, taking into account the inflation of 7.8% in 2022 and the Bank of Portugal’s expected inflation of 5.8% for 2023. As the value of the pension increases, the reductions also increase (see infographic).
Vieira da Silva’s law
The rule is not new. 53-B/2006, of 29 December, drafted by the Socialist and then Minister of Labor and Social Security, José António Vieira da Silva, which entered into force on 1 January 2007. It is the same law that defined the formula for updating pensions based on real GDP growth over the past two years and on average annual inflation, excluding housing, calculated in November of the previous year. However, this calculation was suspended by the current socialist government of António Costa because it had awarded a half-pension bonus to pensioners in October 2022. If it were still in force, the increases would vary between 8.06% for pensions up to 960.86 euros and 7.46% for installments between 2882.58 euros and 5765.16 euros and not between 4.83% and 3.89% for the same range of values.
That mechanism was torn up, but the article that says “pensions that have been in effect for more than a year on the date of production of effects of the annual increase will be updated.” Ordinance No. 24-B/2023 of January 9, which updates pensions for 2023, repeats the same rule: “Statutory and statutory disability and old-age pensions under the general social security system and retirement, reform and disability of the convergent social security” protection regime, previously assigned January 1, 2022, will be updated”.
The issue has not been raised because inflation has been low or even negative in recent years, leading to very small increases in pensions. For example, the annual increase for 2022 varied between 1% and 0.24%.
Faced with abnormally high inflation, caused by the rise in energy and food prices, largely due to the war in Ukraine, but also due to the Covid-19 restrictions that have led to the disruption of supply chains, the loss of purchasing power has become more aggressive and affected the lives of retirees. That is why outrage has increased among those who retired last year and found that they were not entitled to the increase in pensions this month. Dinheiro Vivo received complaints from retirees for being excluded from such an update. They even questioned Social Security, which replied, “You have to be retired for at least a year to account for the increase”. And he gave an example: “a pension that started in December 2021, made a year in December 2022, can already have an increase; a pension that started in January 2022, now becomes a year in January 2023, is not considered does not have a full 12 months at the time of the increase”. Only in 2024 will these pensioners be able to benefit from the regular annual update.
Economists advocate changing the norm
Despite the rule being enshrined in law, economists consulted by Dinheiro Vivo consider it unfair, especially at a time of high inflation. Jorge Bravo, a pension specialist, believes that “this system could be unfair, especially for those who retired on January 1 or 2, 2022, compared to those who requested retirement on December 31, 2021.” “With a difference of a few days, some are entitled to the increase and others have to wait another year,” he emphasizes. The economist therefore proposes a change to this procedure: “The government could get around this standard and update the pension in the month in which it ends a year, which would be fairer”. Eugénio Rosa, linked to the CGTP, already warned about this article in the order in a study published this week, in which he attacks the “social sensitivity of the government with an absolute majority”. Speaking to Dinheiro Vivo, he argues that “although the rule is in law, high inflation completely changes the situation”, so “the government should change this mechanism to avoid an even greater loss of purchasing power for pensioners”.
Cumulative effect of inflation
Calculations made by Dinheiro Vivo based on the accumulated inflation effect in 2022 (7.8%) and 2023 (5.8%), according to projections by the Bank of Portugal, which will absorb part of the pensioners’ income, show see that those who retire at the beginning of January 2022 will have a real loss of a maximum of 12% of the pension amount at the end of 2023. For example, a renovation of 500 euros can save 60 euros per month or 840 euros per year, calculated over 14 months. With a payment of 800 euros, the monthly fine is 96 euros, which is 1344 euros for the whole year. A renovation of a thousand euros has a monthly loss of 120 euros or 1680 euros per year.
Source: DN
