The Sustainability Story

Essay · economics · September 2026

Portugal is told that its pension system is unsustainable and that the only remedy is to work longer. The accounts show a contributory system in surplus, a reserve fund at a record, a closed civil-service scheme paid from taxes, and thirty years of forecasts that were too gloomy. The official projection is solvent, on one condition: that pensions shrink to a third of the average wage. That is a policy, not a law of nature, and there are others.

Reading time ≈ 24 min Livro Branco 1998 → FEFSS 2026 → Ageing Report 2070 A companion to “The Long Retirement”

The story

In June 2025 the European Commission wrote that the rise in pension spending “calls into question” Portugal’s fiscal sustainability, and that the two contributors who support each pensioner today will be one by 2046.[1] In January 2026 the OECD noted that “adjusting the retirement age is seen as the main way to ensure long term fiscal sustainability”.[2] The minister for social security called sustainability “a national purpose”, said that lowering the pension age to 65 was “unaffordable”, and put the cost at 2.5 billion euros a year.[3] In August 2026 the working group the government had appointed to reform the system reported that it had “a mathematical problem of financial sustainability”.[4]

In the same eighteen months the Segurança Social closed 2025 with a surplus of 6.7 billion euros, 2.2 per cent of GDP, the largest in its history; the government moved 5.5 billion of it into the reserve fund; and the fund reached 41.9 billion euros at the end of the year and 49.3 billion by June 2026, enough to pay every contributory pension in the country for twenty-eight months.[5] The prime minister said that pensions were “sacred” and that he would resign before cutting one.[6]

Both sets of statements are made by serious people looking at the same accounts. This essay is about how both can be true at once, what the accounts and the projections actually say, and whether they support the one conclusion that is always drawn from them: that the Portuguese must work more years.

+€5.5 bnsurplus of the contributory Segurança Social in 2025, before the fund’s own income

−€7.0 bnthe State’s 2025 transfer to the CGA, the civil-service scheme closed to new entrants since 2006

21→15%of GDP: what the 2006 and the 2024 Ageing Reports project Portugal will spend on public pensions in 2050 (20.8 and 14.6)

53→34%the average pension as a share of the average wage, 2022 to 2070, in the official projection

The accounts

Two systems, one story

Portugal does not have one pension system. It has a contributory system inside the Segurança Social, a non-contributory one beside it, and a separate scheme for the civil servants who were hired before 2006. The arguments about sustainability usually run the three together, and much of the confusion comes from that.

The contributory system, the sistema previdencial, is the one workers pay into: 34.75 per cent of every wage, 23.75 from the employer and 11 from the employee, with no ceiling, of which about 22.65 points are for pensions. That is among the highest pension contribution rates in the OECD, against an average of 18.6.[7] In 2025 it collected 30.2 billion euros in contributions, paid 19.5 billion in pensions and about 6.5 billion in sickness, unemployment, parental and other benefits, and ended the year with a surplus of 5.5 billion on its pay-as-you-go account. The reserve fund’s investment income added another 1.2 billion.[8] The non-contributory system, the sistema de proteção social de cidadania, pays the social pension, the minimum income, family benefits and social care; the law that founded the modern system says the State budget must finance it, and it does, with a transfer of about 9.6 billion euros in 2025 that left that system balanced to within 55 million.[8] Add the two and the Segurança Social as a whole ran a surplus of 2.2 per cent of GDP in a year when the general government surplus was 0.7 per cent and the central state ran a deficit of 1.8. The social security system is the part of the Portuguese state that is in surplus.[9]

The surplus is not an accident of one good year. The contributory account was negative from 2012 to 2015, at the bottom of the crisis, when the State covered the gap with extraordinary transfers of up to 1.4 billion a year. It has been positive every year since 2016, and the surplus of the system as a whole has grown every year but 2020.[9] What changed is employment. There were 1.27 active contributors for every pension in payment in 2013 and 1.81 in 2025 (Figure 1); contributions rose by 115 per cent between 2015 and 2025, in a decade when output per hour grew by a third of a per cent a year.[10] The Commission’s two contributors per pensioner, falling to one, is the projection; the outturn of the last decade ran the other way.

Fig. 1 — Active contributors to the Segurança Social (people with declared earnings, employees and self-employed) per pension in payment (old-age, invalidity and survivor pensions), 2000 to 2025. Data: Pordata, from the Instituto de Gestão Financeira da Segurança Social and the Instituto da Segurança Social.

Then there is the Caixa Geral de Aposentações, the CGA. Until 2005 civil servants had their own pension scheme, with its own contributions and a State employer that did not always pay its share. In 2006 the scheme was closed: everyone hired since contributes to the Segurança Social like any other worker, and the CGA was left to pay the pensions of those already in it, with a contributor base that can only shrink. It had 740,000 subscribers at the end of 2005 and 350,000 in 2025, against 500,000 retirement pensions and 170,000 survivor pensions; it takes in 3.9 billion in contributions and pays out 11 billion, and the State budget covers the difference, 7.0 billion euros in 2025, 2.3 per cent of GDP, and 7.5 billion budgeted for 2026.[11] Its subscribers will be gone by about 2056, its spending peaks in the mid-2040s, and it will be paying its last pensions around 2110. The Ageing Report has it at 4.5 per cent of GDP in 2022, 5.0 at the peak in 2046 and 0.7 in 2070.[12]

The CGA is where the deficit is. It is the deficit of a closed scheme, which is to say a debt: the cost of pension promises made to people who have already retired or soon will, payable from taxes whether or not anyone reforms anything. Figure 2 puts the two accounts side by side. Together, the contributory Segurança Social and the CGA were 2.8 per cent of GDP in the red in 2014 and 0.5 per cent in 2025, and the line has been climbing for a decade.[4] The reform working group made much of the fact that the combined balance “has been negative every year since 2014”, and it has; it is also a fifth of what it was.

Fig. 2 — Balance of the contributory Segurança Social (pay-as-you-go account, before the reserve fund’s income), the CGA gap (equal to the State transfer that funds it) and the sum, % of GDP, 2014 to 2025. Data: Grupo de Trabalho para a Reforma da Segurança Social (2026), from the Conta da Segurança Social and the CGA accounts; GDP from Eurostat.

There is one honest complication, and the working group is right to raise it. Since 2006 the civil servants hired under the new rules pay into the Segurança Social: 3.4 billion euros in 2025, 11 per cent of all contributions, and 26.6 billion cumulatively, while their own pensions will not fall due in any number until the late 2040s.[4] Part of the contributory surplus is therefore the mirror image of the CGA’s deficit: the same workforce, counted in two ledgers. Take the 3.4 billion out and the 2025 surplus falls from 5.5 to about 2 billion. It does not fall to zero, and the CGA’s bill does not change by a euro whichever way it is counted. The pensions it is paying were earned decades ago; a higher pension age for today’s forty-year-olds does nothing to them.

The ministry of labour and social security, Praça de Londres, Lisbon, 2011, wearing a banner for an employment programme. Photograph by João Carvalho, via Wikimedia Commons, CC BY-SA 3.0.

The record

Thirty years of forecasts

The sustainability story is older than the euro. The Livro Branco da Segurança Social of 1998, the report that framed every reform since, projected in its reference scenario that the system would fall into deficit by 2010, that the deficit would reach 0.7 per cent of GDP in 2015, 1.6 per cent in 2020 and 2.5 per cent in 2025, and warned of “rupture” between 2010 and 2015.[13] The system posted surpluses of 0.4 per cent of GDP in 2010, 0.1 in 2015, 1.0 in 2020 and 2.2 in 2025. The forecast was wrong by four and a half points of GDP at the end, and wrong in the same direction throughout.

The European Commission’s Ageing Reports, produced every three years since 2006 with the member states’ own models, have the same record (Figure 3). The 2006 report projected Portuguese public pension spending at 20.8 per cent of GDP in 2050. The 2009 report cut that to 13.3. The 2012 report saw a peak of 13.5 around 2019 and a slow decline; 2015 a peak of 15.0 in 2033; 2018 a peak of 14.7 in 2038; 2021 a peak of 14.6 in 2035 and a fall to 9.5 by 2070; 2024 a peak of 15.2 in 2046 and 10.4 in 2070.[14] The near term is where forecasts can be checked. The 2018 report projected 13.5 per cent of GDP for 2019; the outturn was 12.7. The 2021 report projected 13.1 for 2022; the outturn was 12.2. In its own review of why, the 2024 report attributes the miss almost entirely to assumptions, not policy.[14]

Fig. 3 — Public pension spending in Portugal as projected by each European Commission Ageing Report from 2006 to 2024, and the outturn on the same definition from 2013. Each projection starts at the actual level of its base year. Data: European Commission and Economic Policy Committee, Ageing Reports 2006–2024; Portugal country fiche 2024.

Actual spending did rise, from 10 per cent of GDP in 2000 to a peak of 15.6 per cent in 2013, and the peak is instructive: it came when GDP had shrunk and the number of pensioners had not, not because pensions had become generous. It then fell for a decade, to 12.5 per cent in 2023 and 13.0 in 2024, about the European average.[15] On the narrower measure of old-age spending by government, Portugal spent 10.8 per cent of GDP in 2024 against 10.7 for the EU, 13.4 for France and 13.9 for Italy.[16]

The forecasters have an answer, and it is partly fair. The 2006 projection was made before the 2007 reform, which is the reform the projection was written to justify: whole-career averaging, a sustainability factor, indexation to prices rather than wages. A forecast that changes the policy it forecasts is not wrong in the ordinary sense. But the misses since 2009, after the reform, have all been in the same direction, and the reasons are not mysterious. The models assumed employment rates that Portugal has since exceeded, migration that it has since received many times over, and a benefit ratio that the reform cut faster than expected. Each of these is a lever, and the essay comes back to them. The point here is narrower: the projections that are cited as proof that the system cannot pay have, for thirty years, said it would be paying more than it turned out to pay.

The projection

Sustainable, on one condition

What does the current projection actually say? The 2024 Ageing Report has Portuguese public pension spending at 12.2 per cent of GDP in 2022, rising to a peak of 15.2 in 2046 as the large cohorts born between 1960 and 1980 retire, and then falling to 11.8 in 2060 and 10.4 in 2070, below where it started. Over the fifty years spending falls by 1.8 points of GDP; across the EU it rises by 0.4. Portugal is one of the few member states whose pension spending is projected to fall, and by one of the largest margins.[14] The Conselho das Finanças Públicas said the same in 2023: the long-run change in ageing-related spending “is driven above all by the fall in pension spending”.[17]

The interesting part is how. The report decomposes the change into its arithmetic (Figure 4). Ageing alone, the rise in the number of over-65s per person of working age from 41 to 68 per hundred, would add 7.3 points of GDP. Three things take it back: fewer pensioners per old person, as later retirement and stricter rules bite, 1.7 points; higher employment and longer careers, 1.0; and smaller pensions relative to wages, 6.1 points. The last is the projection. The average public pension is 52.9 per cent of the average wage in 2022 and 34.3 per cent in 2070; the pension a new retiree receives relative to their final wage falls from 69 per cent to 39 (Figure 5).[14] The Portuguese system is projected to be sustainable because Portuguese pensions are projected to shrink by a third relative to the wages around them. That is not a side-effect; it is the mechanism. The 2002 and 2007 reforms index pensions to prices and count whole careers, and price-indexed pensions in a growing economy fall behind wages every year by the amount wages grow.

Fig. 4 — Top: the 2024 Ageing Report’s decomposition of the change in Portuguese public pension spending between 2022 and 2070, in points of GDP. Bottom: the report’s sensitivity tests, the deviation in 2070 from the baseline under each alternative. Data: European Commission, 2024 Ageing Report, Portugal country fiche, Tables 17 and 30.

Fig. 5 — The benefit ratio (average public pension as a share of the average wage) and the replacement rate at retirement (first pension as a share of the last wage, earnings-related old-age pensions) in the 2024 Ageing Report baseline for Portugal. The hump to 2041 reflects the last cohorts with long civil-service careers. Data: European Commission, 2024 Ageing Report, Portugal country fiche, Table 18.

The same report tests what happens if the assumptions are changed, and the tests are the most useful numbers in it. Freeze the retirement age at today’s instead of letting it follow life expectancy, and spending in 2070 is 1.9 points of GDP higher. Keep pensions at their present share of wages, and it is 4.3 points higher. Cut productivity growth from 0.8 to 0.6 per cent a year, 0.8 points higher; a third less migration, 0.4 higher; a third more migration, 0.4 lower; ten points more employment among the over-55s, 0.4 lower.[14] So the pension age is worth about two points of GDP by 2070 and the shrinking pension about four. Between them they are the whole of the adjustment, and the shrinking pension is twice the age. When the minister says that lowering the age to 65 would cost 2.5 billion a year, she is right about the order of magnitude, about 0.8 per cent of GDP; what she does not say is that the projection she relies on also assumes that her successors will let the average pension fall to a third of the average wage, and that this assumption is doing most of the work.

The government’s numbers

The fund that never runs out

The government publishes its own long-term projection with each budget, for the contributory system alone. The 2026 budget’s version has the pay-as-you-go account in surplus by 1.6 per cent of GDP in 2026 and 1.0 in 2030, in deficit by 0.2 per cent in 2040, 0.4 in 2050, 0.1 in 2060 and 0.4 in 2070; the first deficits appear in the late 2030s and the worst year is around 2045, at half a per cent of GDP. Contributions are held flat at 10.2 per cent of GDP throughout, pensions rise from 7.2 to 9.1.[18] The reserve fund, which by law must hold at least two years of contributory pensions, is projected never to be drawn down: it rises from 15 per cent of GDP to 45 per cent by 2070, five years of pensions, because it is assumed to earn 4.58 per cent a year, an assumption that was 4.12 per cent in the previous budget and 4.39 in the one before.[18] The 2025 and 2024 budgets told the same story with slightly worse numbers (Figure 6), and the fund’s actual growth so far is in Figure 7.

Fig. 6 — The balance of the contributory system (pay-as-you-go account, before the fund’s income) as projected in the sustainability reports attached to the 2024, 2025 and 2026 State budgets, and in the central scenario of the Livro Verde sobre a Sustentabilidade do Sistema Previdencial (2024), % of GDP. Data: Ministério das Finanças, Relatório do Orçamento do Estado 2025 and 2026; Comissão para a Sustentabilidade da Segurança Social, Livro Verde.

Others are less sanguine, and their numbers deserve the same hearing. The Livro Verde commissioned by the previous government projected deficits of 0.9 per cent of GDP in 2040 and 1.5 in 2070, with the fund almost exhausted by then, and said the deficits were coverable from the fund except if productivity disappoints.[19] The Tribunal de Contas audited the budget’s sustainability report in 2025 and called it incomplete, because it leaves out the non-contributory system and the CGA, and its model unreliable, because it is deterministic and its revenue projections had missed by 11 to 19 per cent.[20] The fund itself lost 13 per cent in 2022 and made 3.9 in 2025; half of it is Portuguese government debt, which means that in a fiscal crisis the pensions’ cushion and the State’s creditworthiness are the same thing.[21]

Fig. 7 — The Fundo de Estabilização Financeira da Segurança Social at the end of each year, % of GDP, 2000 to 2025, with its coverage of contributory pensions in 2022 and 2025. Data: Conselho das Finanças Públicas, Relatório 04/2026 and Ocasional 02/2024; IGFCSS; GDP from Eurostat.

Take the gloomiest of these seriously. A deficit of 1.5 per cent of GDP in 2070, on the contributory account, after the demographic peak has passed, is a problem of the kind a country solves with a decision, not a crisis. It is smaller than the CGA transfer the State is paying today without anyone calling it a rupture. It is also, on every one of the projections in Figure 6, a deficit that appears in the late 2030s and never exceeds 1.5 per cent of GDP, in a system that is currently running a surplus of 1.6 to 1.8. The question the projections raise is not whether Portugal can pay its pensions. It is which of several ways of paying them the country prefers, and the projections have quietly chosen one.

The levers

What the forecast leaves out

Pay-as-you-go pension spending as a share of GDP is the product of three ratios: pensioners per worker, the average pension per average wage, and wages as a share of GDP. The Ageing Report projects the first two and holds the third constant by assumption.[14] The pension age acts on the first ratio. So does everything that changes how many people work, and every projection of the last decade has been wrong about that.

Employment. The report assumed in 2022 that the employment rate of Portuguese aged 55 to 64 would rise from 66 per cent to 70 by 2040 and 76 by 2070. It was 40 per cent in 2012, 69.5 in 2025, and is already above the assumption for 2040 (Figure 8).[22] The employment rate of 20 to 64 year olds, 79.6 per cent in 2025, is a point below what the projection assumes for 2070 and already above Germany’s 2013 level. There is room left, Sweden’s over-55s work at 78 per cent, but the argument of The Long Retirement applies: a Portuguese 65-year-old has 9.8 healthy years ahead against a Swede’s 14.2, and a working life extended into unhealthy years is not the same policy as one extended into healthy ones.

Fig. 8 — Left: employment rate of Portuguese aged 55 to 64, 2010 to 2025, against the 2024 Ageing Report’s assumed path. Right: net migration to Portugal in thousands, the Ageing Report’s base-year figure for 2022, INE’s figures for 2023 and 2024, and the report’s baseline assumption for 2030, 2050 and 2070. Data: Eurostat (lfsa_ergan); INE; European Commission, 2024 Ageing Report, Portugal country fiche, Tables 8 and 10.

Migration. The baseline assumes net migration of 82,000 people in 2022 falling to 16,000 a year by 2030 and 27,000 by 2050. INE counted 156,000 in 2023 and 144,000 in 2024, and Eurostat’s population balance, which includes a statistical adjustment, puts the inflow higher still, as The Two-Thirds Country described.[23] The effect on the accounts is not hypothetical. Foreign nationals were 5 per cent of contributors in 2015 and 20 per cent in 2025, 1.1 million people; they paid 4.15 billion euros in contributions in 2025, 14 per cent of the total, received 0.8 billion in benefits, and contributed 3.3 billion net, which is three-fifths of the year’s contributory surplus and 16 billion over the decade. The Conselho das Finanças Públicas notes that without them the contributor base would have stopped growing in 2024.[24] The counterpoint is real and should be stated: today’s contributors are tomorrow’s pensioners, and a system that solves its demography with immigrants is buying time, not a solution. But the time is long, the projection assumed almost none of it, and a recent estimate of the fiscal adjustment Portugal’s ageing requires puts it at 2.9 points of GDP with immigration of half a per cent of the population a year and 10.8 points with none.[25]

Wages. Contributions are levied on wages, so the share of GDP that goes to wages is a lever the projection does not pull. Compensation of employees was 48.2 per cent of Portuguese GDP in 2001, 43.6 at the bottom in 2016 and 48.1 in 2025; each point of wage share is worth about 0.35 points of GDP in contributions, of which 0.23 for pensions.[26] The recovery of the wage share since 2016 explains a good part of the surplus, and it is the reason contributions rose by 115 per cent in a decade when productivity barely moved. Portugal still collects less in social contributions than the countries it compares itself with, 12.4 per cent of GDP against 14.0 for the EU, 16.5 for France and 17.5 for Germany, not because its rate is low but because its wages are.[16] An economy that produces two-thirds of a European hour and pays two-thirds of a European wage funds two-thirds of a European pension system; the sustainability problem, seen this way, is the productivity problem of the companion essay wearing a different hat.

Contributions and other revenue. The report tests neither a higher contribution rate nor other sources of revenue, because it projects legislation, not options. Others have. A study for the Fundação Francisco Manuel dos Santos found that raising the contribution rate by 1.5 points would extend the fund’s life further than a Swedish-style notional-accounts reform, at almost no cost to pension adequacy.[27] Spain, facing a worse demographic curve, chose in 2021 to 2023 to raise revenue rather than the age: an intergenerational equity surcharge rising to 1.2 points, worth 0.4 per cent of GDP, and contribution ceilings lifted.[28] Portugal’s own experiments with broadening the base have been small: two points of corporate tax and a surtax on high-value property are earmarked for the fund, and together they brought 0.17 per cent of GDP in 2025.[29] The 2024 Livro Verde’s first recommendation was to replace part of the employer contribution with a levy on value added, so that capital-intensive firms pay as well as labour-intensive ones; its technical note found that ten points of the payroll rate equal about 6.2 per cent of net value added.[19] The reform working group did not adopt it. It also rejected, for good reasons, the old proposal to cap contributions, which would cost the system 7 to 18 billion euros in present value before it saved anything.[19]

Put the levers together and the scale is clear. The government’s own deficits, 0.2 to 0.5 per cent of GDP in the 2040s, are of the size of any one of them: a point of wage share, a point on the contribution rate, three points of employment rate, or the net contribution of the immigrants of the last decade. The Livro Verde’s worse deficit, 1.5 per cent, is the size of two or three. Holding the pension at its present share of wages for fifty years, the 4.3 points of the Ageing Report’s test, would take all of them, and that is the honest measure of the choice the reforms made. It is a real cost. It is not the same thing as the system being unable to pay.

Elsewhere

How other countries answered

The link between the pension age and life expectancy that Portugal legislated in 2013 is presented as the European norm. It is one answer among several, and several countries have changed theirs. Denmark, whose link is one-for-one, voted in May 2025 to raise its age to 70 by 2040, and its prime minister has since said the country should not go on raising it automatically beyond that.[30] The Netherlands legislated a one-for-one link and then, in 2019, before it ever applied, slowed it to two-thirds, the same ratio as Portugal’s. Sweden uses two-thirds with a six-year lag, inside a notional-accounts system that adjusts pensions automatically when the accounts do not balance, and has triggered that brake three times. Slovakia capped its age at 64 in 2019 and reinstated the link in 2022. Italy suspended its link from 2019 and will not resume it until 2027. France raised its age from 62 to 64 in 2023 against months of strikes and suspended the increase in October 2025. Germany has no link, and in 2025 guaranteed a replacement level of 48 per cent until 2031 instead. Spain repealed its sustainability factor in 2021 and raised contributions.[30]

Every one of these was a choice about how to share the cost of longer lives between later retirement, smaller pensions and higher contributions, and the choices differ because the countries differ. What none of them shows is a system that could not pay. The European record is of pension ages, benefit formulas and contribution rates being set, revised and sometimes reversed by parliaments, on the basis of projections that were themselves revised every three years.

Who pays

The condition, and who meets it

Return to the condition on which the system is sustainable: that pensions fall to a third of wages. Who this falls on is not abstract. The average old-age pension of the general regime was 611 euros a month in December 2024, 786 for men and 452 for women; the average new pension awarded that year was 710.[31] Eurostat’s aggregate replacement ratio, the median pension of people in their late sixties over the median earnings of people in their fifties, is 0.68 in Portugal, and 17.8 per cent of Portuguese over 65 live below the poverty line, more than working-age adults, as The Long Retirement showed. A benefit ratio that falls from 53 to 34 per cent starts from there.

Waiting for food distribution outside the Centro de Apoio Social dos Anjos, Lisbon, June 2020. The posters read “Resgatar o Futuro”, rescue the future. Photograph by Jules Verne Times Two (julesvernex2.com), via Wikimedia Commons, CC BY-SA 4.0.

The rising age falls unevenly too. About 24,000 Portuguese took early pensions in 2024, 9,000 of them through long-term unemployment and the rest through the flexible regime, which cuts the pension by half a per cent for every month before the normal age and by a sustainability factor that was 15.8 per cent in 2024, 16.9 in 2025 and 17.6 in 2026; the stock of early pensioners below the legal age is about 100,000.[32] Very long careers are exempt: someone who reaches 60 with 48 years of contributions, or 46 having started at sixteen or younger, can retire without the cut. That exemption is the one place where Portuguese law recognises what the health section of the companion essay measured: that the people asked to work to 67 are not asked for the same thing. A man with a degree has eleven and a half healthy years ahead of him at the 2026 pension age; a woman with basic schooling has eight.

Coda

Not a forecast, a policy

The story Portugal is told has three parts: the system is in deficit, the deficit will grow as the country ages, and the only remedy is to work more years. The first part is true of the CGA and false of the Segurança Social, and the CGA is a closed scheme whose bill does not depend on when anyone now working retires. The second part is a projection, made by institutions whose projections for Portugal have been too pessimistic every time for thirty years, and whose current version has spending falling by 2070. The third part is the one the projections do not support at all. In the official arithmetic the rising pension age is worth two points of GDP in 2070; the shrinking pension is worth four; and the levers that the projection holds fixed or has already been overtaken by, employment, migration, the wage share, the contribution rate, are each worth a good part of a point. The Portuguese pension system is not unsustainable. It has been made sustainable, on paper, by a legislated decision to let pensions fall to a third of wages and to push the pension age up with life expectancy, and that decision is presented as the only one arithmetic allows.

The honest counterpoints are these. The demographic wave between 2030 and 2050 is real and the projections agree on it. The CGA will cost the State two points of GDP a year for two more decades, a bill nobody can wish away. The reserve fund’s projected growth depends on returns it has not recently earned. Immigrants who pay in now will draw out later. And reversing the age link, or holding the benefit ratio, is not free: two points of GDP and four, on the report’s numbers, to be found from somewhere. But finding two to four points of GDP over fifty years, in a country whose social contributions are three to five points of GDP below France’s and Germany’s because its wages are, is a political question about wages, productivity and who pays, not a demographic impossibility. That is the argument of the whole series. The century took its productivity mostly as income and let institutions decide the rest; the retirement the twentieth century won was the largest piece of leisure it took; and whether the twenty-first keeps it will be settled by rules that are being written now, on the strength of a story that the accounts do not tell.

Open threads

Where this could go

The notional accounts proposal. The 2026 working group recommends moving Portugal to Swedish-style notional defined-contribution accounts. What that would do to the redistribution inside the present formula, to the minimum pensions and to the uniform pension age is a question the report only half answers.

The CGA in present value. The working group values the State’s future transfers to the CGA at between 100 and 190 per cent of GDP depending on the discount rate. What that liability is, compared with the public debt it resembles, and how it should be shown in the accounts, would settle part of the argument about the combined balance.

The value-added contribution. The 2024 Livro Verde’s proposal to shift part of the employer contribution onto value added has a technical note and no political sponsor. A calculation of who would pay more and who less, by sector and firm size, would show whether it is the diversification the system needs or a subsidy to labour-intensive low-productivity firms.

On method and tools

This piece was written collaboratively with Claude Opus 5.5 (Anthropic): human specification, editorial direction and critical review; machine data research, analysis and drafting. The numbers are compiled and computed by scripts/pensions.py from public documents and datasets: the Conselho das Finanças Públicas’ annual reports on the Segurança Social and CGA accounts (2014–2025) and its 2024 paper on the reserve fund, the Conta Geral do Estado, the Relatório do Orçamento do Estado and its sustainability annex for 2024 to 2026, the Livro Verde of 2024, the working group report of June 2026, the Tribunal de Contas audit of January 2025, the European Commission’s Ageing Reports from 2006 to 2024 and the 2024 Portugal country fiche, Pordata, INE and Eurostat. The raw documents and the tables extracted from them, with a page reference for every number, are kept with the script’s data; results are in docs/pensions-results.json and the figures in docs/pensions-figures.html. Balances are on the public-accounts basis used by the Conselho das Finanças Públicas, excluding EU funds; the contributory balance is the pay-as-you-go account before the fund’s investment income unless stated. Projections are quoted from their sources and not re-estimated. The photographs are from Wikimedia Commons and credited with their licences in the captions; local copies are in assets/images/2026/.

The cover photograph shows three men on a bench in Afurada, the fishing village across the Douro from Porto, in 2010; photograph by Adam Jones, via Wikimedia Commons, licensed CC BY-SA 2.0, cropped.

Authored by: Luis Matos Ferreira — Physicist, Developer, Writer

Related essays on this blog

1. The Long Retirement — exit ages, healthy years, pension adequacy and the healthy-years pension age.
2. The Two-Thirds Country — Portugal’s productivity, hours, wages and the migration turn.
3. The Fifteen-Hour Week — Part I: Keynes’s prediction, productivity and the hours.
4. Where the Hours Went — Part II: who got the income, what it bought, and where the hours of work actually go.
5. O Grande Debate — the argument over markets, states and who gets the output.

Sources

1. European Commission, 2025 Country Report: Portugal, SWD(2025) 222 final, 4 June 2025, section 1 and Annex A1.
2. OECD, OECD Economic Surveys: Portugal 2026, January 2026, chapter on fiscal sustainability.
3. Maria do Rosário Palma Ramalho, statements of 28 January 2025 (ECO) and 8 May 2026 (Diário de Notícias, Jornal de Negócios).
4. Grupo de Trabalho para a Reforma da Segurança Social (coord. Jorge Bravo), Relatório Final, June 2026, presented 18 August 2026: chapter 2 (CGA) and Tabela 3.7 (combined balance 2014–2025); Observador, 18 August 2026.
5. Conselho das Finanças Públicas, Evolução orçamental da Segurança Social e da CGA em 2025, Relatório 04/2026, May 2026; Governo de Portugal, “Governo reforça fundo das pensões em 5,5 mil milhões de euros”, 21 January 2026; IGFCSS via ECO, 17 July 2026 (49.3 billion euros, 28.4 months of pensions at 30 June 2026).
6. Luís Montenegro, parliamentary debate of 17 June 2026 and PSD summer university, 27 August 2026 (Observador, ECO).
7. OECD, OECD Reviews of Pension Systems: Portugal, 2019, chapter 3; OECD, Pensions at a Glance 2023, country note for Portugal.
8. Conselho das Finanças Públicas, Relatório 04/2026, Quadro 2 (accounts by subsystem, 2024 and 2025); Lei n.º 4/2007, de 16 de Janeiro (Lei de Bases da Segurança Social), art. 90 (financing of the citizenship system by the State budget).
9. Conselho das Finanças Públicas, Relatório 04/2026, Quadro 1 and Gráfico 12 (overall balance 2010–2025, excluding EU funds and the 2012–2017 extraordinary transfers); INE, national accounts, general government balance by subsector, 2025.
10. Pordata, from IGFSS and ISS: active beneficiaries with declared earnings and pensions in payment, 2000–2025 (tables 379, 123, 2573); Conselho das Finanças Públicas, Relatório 04/2026, section 1 (contributions 2015–2025).
11. Pordata, from CGA: contributions, State comparticipation and pension expenditure, 2000–2025; CGA, Relatório e Contas 2023; Ministério das Finanças, Relatório do Orçamento do Estado 2026 (comparticipation budgeted for 2026); Lei n.º 60/2005, de 29 de Dezembro (closure of the CGA to new subscribers).
12. European Commission and Economic Policy Committee, 2024 Ageing Report: Portugal country fiche, Table 15 (CGA and Segurança Social expenditure); Grupo de Trabalho para a Reforma da Segurança Social, chapter 2 (CGA projections to 2110).
13. Comissão do Livro Branco da Segurança Social, Livro Branco da Segurança Social, January 1998, reference scenario, balance of the system 2000–2050 as tabulated in the sources of the 2024 Ageing Report exercise for Portugal and in academic reviews of the Livro Branco.
14. European Commission and Economic Policy Committee, The 2024 Ageing Report: Economic and Budgetary Projections for the EU Member States (2022–2070), Institutional Paper 279, April 2024, Tables I.1.10, I.1.21 and II.1.64; Portugal country fiche, Tables 8, 10, 14, 17, 18, 30–33; earlier Ageing Reports of 2006, 2009, 2012, 2015, 2018 and 2021 for the projections shown in Figure 3.
15. Eurostat, ESSPROS: expenditure on pensions (spr_exp_pens), all schemes, % of GDP, Portugal and EU, 1995–2024.
16. Eurostat, general government expenditure by function (gov_10a_exp), COFOG 10.2 old age, % of GDP, 2024; main national accounts tax aggregates (gov_10a_taxag), net social contributions D61, % of GDP, 2024.
17. Conselho das Finanças Públicas, Riscos Orçamentais e Sustentabilidade das Finanças Públicas 2023, Relatório 11/2023, December 2023, pp. 34–35; Banco de Portugal, Boletim Económico, October 2023, box on ageing and pension spending.
18. Ministério das Finanças, Orçamento do Estado para 2026: Elementos Informativos e Complementares, Relatório sobre a Sustentabilidade Financeira da Segurança Social, Quadro 2.32 and accompanying tables; the same annexes to the 2024 and 2025 budgets; Relatório do Orçamento do Estado 2025, Quadro 6.9.
19. Comissão para a Sustentabilidade da Segurança Social, Livro Verde sobre a Sustentabilidade do Sistema Previdencial, 2024 (edition of January 2025), conclusions and recommendation 1; Notas Técnicas 17 (contribution ceilings) and 20 (value-added contribution).
20. Tribunal de Contas, Relatório n.º 17/2024-2.ª S., audit of the report on the financial sustainability of the Segurança Social, January 2025, summary.
21. Conselho das Finanças Públicas, O Fundo de Estabilização Financeira da Segurança Social, Ocasional 02/2024; IGFCSS, annual returns 2022–2025 and portfolio composition; Decreto-Lei n.º 367/2007, de 2 de Novembro, art. 16 (two-year reserve rule).
22. Eurostat, Labour Force Survey: employment rates by age (lfsa_ergan, lfsi_emp_a), Portugal, Sweden, Germany and the EU, 2010–2025.
23. INE, Estatísticas Demográficas and Estimativas de População Residente: net migration 2023 and 2024; Eurostat, demographic balance (demo_gind), 2022–2025.
24. Conselho das Finanças Públicas, Relatório 04/2026, pp. 9–15 (foreign contributors and their contributions, 2015–2025); Observatório das Migrações, report of 10 March 2026.
25. Bernardino, Franco & Teles Morais, “Ageing, immigration and fiscal adjustment in Portugal”, SSRN working paper, 2025, as reported by ECO, 1 October 2025.
26. Eurostat, national accounts (nama_10_gdp): compensation of employees D1 and GDP, Portugal, 1995–2025; the contribution elasticity applies the 34.75 per cent rate and its 22.65-point pension share to a point of GDP in wages.
27. Moreira et al., The Sustainability of the Portuguese Pension System (DYNAPOR), Fundação Francisco Manuel dos Santos, 2019, 2024 edition, key findings.
28. AIReF, Opinión sobre la sostenibilidad de las Administraciones Públicas a largo plazo: el sistema de pensiones, Documento Técnico 2/23 and 2025 report; Ley 21/2021 and Real Decreto-ley 2/2023 (Spain).
29. Conselho das Finanças Públicas, Relatório 04/2026 and Conta Geral do Estado 2025: revenues consigned to the FEFSS (IRC, adicional ao IMI, banking levy), 2024 and 2025.
30. OECD, Pensions at a Glance 2023, chapter 1 (retirement-age links and their revisions); Folketing vote of 22 May 2025 (Denmark); Wet temporeel verloop AOW-leeftijd 2019 (Netherlands); Pensionsmyndigheten (Sweden); Lecornu government statement of October 2025 (France); Rentenpaket 2025 (Germany); Ley 21/2021 (Spain); Slovak constitutional amendment of 2019 and Act of 2022.
31. Ministério das Finanças, Orçamento do Estado para 2026: Elementos Informativos e Complementares, Quadros 2.5–2.8 (average pensions of the general regime, December 2014–2024).
32. Instituto da Segurança Social and Pordata, new and existing early pensions, 2022–2024 (Observador, 29 January 2024 and 27 January 2025; ECO, 12 October 2023); Portarias n.º 358/2024/1 and 476/2025/1 (sustainability factors for 2025 and 2026); Decreto-Lei n.º 119/2018, de 27 de Dezembro (very long careers).