"Expensive and generous." IMF defines the Portuguese pension system – The Economic Journal


The IMF considers that the Portuguese pension system remains "expensive" and "generous", despite changes in recent decades aimed at strengthening its sustainability, according to the report on Portugal under Article IV, released today.

In the document on the annual review of the Portuguese economy, the International Monetary Fund (IMF) refers to the changes in pensions of the last decades, such as the increase of the legal retirement age, the link to the average life expectancy and the reduction of the benefits of new retirees after to 2007.

However, the fund underlines that the pension system "remains expensive, generous by OECD standards [Organização para a Cooperação e Desenvolvimento Económico] and little does correct inequality "in old age pensions.

"It is recommended that the results of the reforms be re-examined in order to identify possible actions" to "increase equity in the system and maintain tight control over the path of spending," the IMF said.

The fund suggests, for example, that the replacement rates (pension value as a percentage of salary) can be reduced to the upper echelons in order to gradually converge to the average rates in the European Union.

In the report, the IMF also considers that the "pressure" on the wage bill is also increasing, due to the 2% increase in public employment in 2018, despite the Government's commitment to reduce the number of civil servants.

This situation reflects "the increase in needs" with the return of the 35 hours a week in the civil service, the fund says.

The IMF also says that the "pressure" on wages also results from the unfreezing of careers in the civil service.



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