Sustainability of the Portuguese Pension System
Almost half of the people in Portugal would live in poverty without state social support. Pensions today absorb the overwhelming majority of the Social Security budget, which is funded mainly by taxes from workers and companies, but also by gambling revenue and other funds from the state budget.
However, the country's demographic transition (an increase in the population aged over 65 and a decrease in the working population) and the macroeconomic scenarios for the future (with relatively modest growth rates) suggest that the Portuguese state will not be able to finance increasingly high expenditure on the pension system without incurring chronic deficits.
The numerous questions that this scenario raises are answered in the study "Sustainability of the Portuguese Pension System" by Fundação Francisco Manuel dos Santos and coordinated by Amílcar Moreira.
This study stands out for its use of an absolutely innovative tool in the national context, DYNAPOR – Dynamic Microsimulation Model for Portugal, a dynamic microsimulation model of the Portuguese public pension system, which was developed from a model (MIDAS_BE) used by the Federal Planning Bureau to make assessments about the future developments in the Belgian pension system. DYNAPOR reliably simulates the life trajectories of a representative sample of the Portuguese population up to 2070, making it possible to project:
- how many people will be able to receive one of the system's many pensions each year,
- the value of these pensions and the public expenditure associated with this contingent of pensioners.
- how many people will be working and how much they will have to pay in contributions to the system in the future for it to be sustainable.
Through this study and the answers to these and other questions, Fundação Francisco Manuel dos Santos seeks to contribute to more informed debate on the financial and social sustainability of the Portuguese public pension system, suggesting some possible reform paths that could guarantee its future viability.
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