Anyone who retires in 48 years, in 2070, risks losing more than half of their salary on the pension they receive, according to a study by the Nova School of Business and Economics presented yesterday at the annual conference of the Supervisory Authority for Insurance and Pension Funds (ASF). For example, if, in 2070, a worker with a salary of two thousand euros retires, he will only be entitled to 46% of his last salary, or 920 euros.
Current pensions are even close to the value of the last salary received. In 2019, the salary replacement rate for retirement was 79%, according to the same study. That is to say that for a salary of two thousand euros, the worker receives 1580 euros on retirement. But for 48 years, the estimates have been much grimmer and point to a reduction of 33 points, from 79% to 46%, the third largest drop in Europe, just behind Spain and Latvia. The fall 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 cover the gap, which will increase over the years, between salaries and pensions. This means that reductions in social security or the Caixa Geral de Aposentação, in the case of civil servants, will not be enough to pay pensions equivalent to the income of workers. In view of 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 yesterday at ASF’s annual conference. The biggest incentive to save for retirement is the expectation of a decline in income in the future, with 54% of respondents citing this reason. 14% fear worsening healthcare costs; 12% intend to save for additional income for travel or other hobbies; and 9% are saving to meet the rising costs of nursing homes or residences.
Analyzing now the application of savings for retirement, it appears that only 13% of Portuguese opt for complementary mechanisms such as retirement savings plans (PPR). Most (26%) of respondents prefer to invest in stocks and 18% have their money in term deposits, which in recent years have given very low returns due to negative interest rates. This situation persists, despite the steep rise in Euribor rates, as banks have resisted rising interest rates on deposits relative to loans.
Faced with reduced savings for retirement and the inability of the public system to provide benefits equivalent to wages, the former Socialist Minister of Finance, Fernando Teixeira dos Santos, defends the creation of savings plans in companies to supplement retirement of workers. “The existence of a business plan, which integrates people into this pillar of savings, is fundamental,” said the former governor during the annual conference of the ASF. For this, he stressed, “we must see how it is possible to generate the best incentives so that companies are predisposed to go ahead with these types of plans”. Teixeira dos Santos noted that “there is already a perception that the replacement rate” of the amount of retirement compared to the last salary “is not 100%”. However, he noted that “there are still many people who live under the illusion” that the pension will be equal to the salary. “The demographic trend being inevitable, the situation will worsen and the sustainability factor in the calculation of pensions will have repercussions and this can be an incentive to become aware of the need to save more to compensate for an increasingly reduced over time,” he concluded.