Government defends updating of pensions “less sensitive to inflation peaks” | Social Security

Despite not yet having a concrete proposal regarding the revision of the pension updating formula, the Government adds that the objective is to make this mechanism “less sensitive to inflation peaks”, taking into account longer reference periods and not just the year. previous. The expectation is that the new criteria can be applied as early as 2024.

“The idea is to assess what changes we will have to make to make the formula less sensitive to inflation spikes and very abrupt changes”, said the Secretary of State for Social Security, Gabriel Bastos, on the sidelines of the debate on “The Future of Social Security in Portugal”, organized this Wednesday by the Lisbon delegation of the Center for Social Studies (CES) of the University of Coimbra.

On the Government side, he added, “we have already been thinking about how this can be done and there are ways, without changing the formula, to consider longer reference periods” in order to smooth the impact of the indicators that are taken into account, namely the inflation.

In practice, it is not a matter of changing the formula, but of changing the way in which the criteria – in particular inflation – are measured.

In September last year, the Government announced that it would divide the increase in pensions in 2022 into two stages, which in practice resulted in a suspension of the automatic updating formula provided for by law (which takes into account the inflation of the previous year and economic growth), preventing pensions from having an increase of more than 8% in January.

Although the subject was not part of the specifications of the commission for the diversification of sources of financing and sustainability of Social Security, 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 will be decided in time for the State Budget for 2024, which is presented in October, so that they can take effect next year. In that sense, he hopes to have a concrete proposal from the commission at a preliminary stage and before the delivery of the final report, scheduled for June.

“It would be desirable that, in time for the discussion of the budget, we could already have a clearer idea, so that we could start studying how to implement these changes”, he said.

As for the diversification of funding sources, one of the points addressed in the debate promoted by the CES, the Secretary of State did not want to reveal the Government’s preferences and referred more concrete measures for the second half.

“The Government has its reading and its position of intransigent defense of the model that we have of public, universal and solidary Social Security, but there is a range of possibilities that we have to discuss and evaluate politically”, he guaranteed, after his intervention in the debate

In the debate, which included researchers, trade unionists, university professors and some members of the social security commission, the suspension of the formula for updating pensions in 2023 was highly criticized.

“The government has awakened the monster of unsustainability in the system”, summarized Manuel Carvalho da Silva, coordinator of the Lisbon CES delegation, challenging the Government to protect the financial health of Social Security.

These measures, defended some of the participants, undermine the confidence that is the basis of the Social Security system, warning of the risk of young people – with precarious and intermittent work paths – moving further and further away from the system.

In the audience, Renato do Carmo, director of the Observatório das Desigualdades and responsible for designing the youth survey launched by the Social Security commission, revealed that “we can be relatively comfortable with the responses [dos jovens] who, surprisingly, value Social Security.

On the table was also the need to diversify funding sources (complementary to the Single Social Tax), through the creation of taxes on technology holders or providing for tax assignments to be considered “structural sources” of Social Security, as defended Paulo Pedroso, university professor and former Minister of Labor.

The creation of complementary savings systems within the scope of collective bargaining was another of the clues left by the participants.

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