by Although it does not yet have a concrete proposal to revise the pension update formula, the Government adds that the aim is to make this mechanism “less sensitive to inflation peaks”, taking into account longer reference periods and not just the previous year. The expectation is that the new criteria can be implemented as early as 2024.
“The idea is to assess what changes we should make to make the formula less sensitive to inflation spikes and very sharp changes,” Social Security Minister Gabriel Bastos said on the sidelines of a debate on “The Future of Social Security Insurance in Portugal”, organized this Wednesday by the Lisbon delegation of the Center for Social Studies (CES) of the University of Coimbra.
On the government’s side, he added, “we have already thought about how this can be done and there are ways, without changing the formula, to look at longer reference periods” in order to smooth out the impact of the indicators taken into account. , i.e. inflation.
In practice, this is not a change in the formula, but a change in the way the criteria – particularly inflation – are measured.
In September last year, the government announced that it would split the pension increase in 2022 into two stages, which in practice had the effect of suspending the automatic update formula provided for by law (which takes into account the previous year’s inflation and economic growth), preventing pensions from rising more than 8% in January.
Although the issue was not part of the specifications of the committee on the diversification of sources of funding and sustainability of Social Security, which was created in July 2022, the government ended up asking experts to also look at the formula for updating pensions.
Gabriel Bastos’ expectation is that the changes for the 2024 State Budget presented in October will be decided on time, so that they will come into force next year. In this sense, he hopes to have a concrete proposal from the committee at a preliminary stage and before the delivery of the final report, which is scheduled for June.
“It would be desirable, in time for the budget debate, if we could already have a clearer idea so that we can start to study how we will implement these changes,” he said.
Regarding the diversification of funding sources, one of the points examined in the discussion promoted by the CES, the foreign minister did not want to reveal the government’s preferences and referred to more specific measures for the second half.
“The Government has its reading and its position to uncompromisingly defend the model we have of public, universal and solidarity Social Security, but there are a number of possibilities that we need to discuss and evaluate politically,” he guaranteed.
The debate, which was attended by researchers, trade unionists, university professors and some members of the social security committee, strongly criticized the suspension of the pension update formula in 2023.
“The government has awakened the monster of unsustainability in the system,” summed up Manuel Carvalho da Silva, coordinator of the Lisbon CES delegation, challenging the government to protect the financial health of Social Security.
These measures, some of the participants defended, undermine the trust that is the basis of the social security system, warning of the risk of young people – with precarious and interrupted work paths – increasingly drifting away from the system.
In the audience, Renato do Carmo, director of the Observatório das Desigualdades and responsible for the design of the youth survey launched by the Social Security commission, revealed that “we can be relatively comfortable with the answers [dos jovens] who, surprisingly, value Social Security.
Also on the table was the need to diversify the sources of financing (complementary to the Single Social Tax), through the creation of taxes on technology owners or the provision for tax assignments to be considered “structural sources” of Social Security, as defended by Paulo Pedroso, university professor and former Minister of Labour.
The creation of additional savings systems in the context of collective bargaining was another of the indications left by the participants.
