HomeFITNESSwhat it is and how it affects your reform

what it is and how it affects your reform

It’s called sustainability factor because it aims to guarantee the sustainability of Social Security, that is, to ensure that there is enough money to pay current and future pensions, as well as all other social benefits.

When talking about a sustainability factor, the word penalization is almost always associated. This is because, in practice, this value – which in 2023 is 13.83% – represents a cut in the amount of the pension for those who intend to retire before the legal age.

The objective is, therefore, discourage this anticipation of reform. For what? To reduce the number of years in which the State will have to pay a pension, thus reducing the expense of this social benefit.

Who does it apply to and what are the exceptions?

In 2023, the statutory retirement age is 66 years and 4 months. In 2022 it was 66 years and seven months, one month more than in 2021, when the statutory retirement age was 66 years and six months.

Thus, anyone who intends to retire earlier and does not fit the exceptions provided for in the law, will have a 13.83% cut in the pensionplus 0.5% for each month left to reach that age.

Who escapes the sustainability factor?

Apart from persons waiting until the statutory retirement age, the sustainability factor does not apply in the following cases:

  • Very long contributory careers: early pensions are spared by the regime for very long contributory careers, that is, for those aged 60 or over and at least 48 years of contributory career; or, 60 years of age or older and at least 46 years of contributory career, having started making contributions to Social Security or Caixa Geral de Aposentação (CGA) before the age of 17.
  • Age flexibilization regime: beneficiaries who are at least 60 years old and have 40 or more years of discounts do not apply the sustainability factor if they request early retirement.
  • Conversion of disability pension into old-age pension: according to Decree-Law No. 126-B/2017 and with the information contained in the Social Security Practical Guide on Old Age Pension, the sustainability factor also does not apply when a disability pension is converted into an old-age pension. That is, when someone who was retired due to disability reaches the normal age for access to the current pension.
  • Workers who exercise Professions considered fast-wearing.

Which fast-wearing occupations are covered?

The non-application of the sustainability factor covers some activities that, due to their level of demand, make it difficult to perform them after a certain age. Therefore, they are entitled to early retirement under special conditions.

Thus, and in accordance with the Decree-Law 70/2020the sustainability factor does not apply to:

  • Workers covered by international agreements in the Autonomous Region of the Azores. That is, who have worked at the Lajes Base and Telemeasurement Station of the French Republic;
  • Workers working inside mines, mining mills and workers in the extraction or primary transformation of stone, including sawing and cutting rough stone;
  • Home embroiderers in Madeira;
  • Classical or contemporary ballet professionals;
  • Port workers integrated into the national port workforce;
  • Employees of the National Uranium Company, SA;
  • Air traffic controllers;
  • Commanding pilots and co-pilots of commercial public passenger, cargo or mail transport aircraft;
  • Maritime workers in the long-haul, coastal and coastal trade and fisheries;
  • Registered maritime workers engaged in fishing activities.

These workers, even if they applied for their pension in 2019, were covered by the regime that only came into force on 1 January 2020.

The accounts that justify the sustainability factor

In November 2022, according to INE’s provisional estimates for 2020-2022, life expectancy at age 65 fell to 19.30 years.

In addition to this issue and consequent expenditure on reforms, there is another: the demographic imbalance. That is, the number of births does not follow the number of deaths.

Data revealed by National Institute of Statistics in January 2022indicate that in 2021 there were 125,032 deaths.

If people live longer and fewer babies are born, the forecast is that the trend of having many retirees and few people of working age and therefore contributing to the reforms will continue.

And here, it should be remembered that the amount deducted for Social Security is not intended to finance your retirement, but that of those who are now retired.

Thus, the value of your pension will come from the discounts of your children and grandchildren.

Alerts on Social Security funding

Issues related to the sustainability of Social Security, which led to the implementation of the sustainability factor, began to be discussed in the late 1990s and were presented in the so-called Social Security White Paper.

At that time, it was warned that, if nothing was done, Social Security would no longer be viable in 2020. In the meantime, measures were taken to prevent this from happening.

The global data for 2022 is not yet known, but in 2021, Social Security ended the year with a surplus of 2,254 million euros.

Even so, the expenditure was 31,226.3 million euros, an increase of 4% compared to 2020. An increase “generated essentially by the introduction of exceptional and temporary measures within the scope of COVID-19”, as explained by the Directorate-General for Budget (DGO) in the Budget Execution Summary. It is also necessary to take into account the various transfers from the State Budget, which helped to balance the accounts.

Thus, the combination of factors such as an aging population, low birth rate and increasing life expectancy is a pension funding risk.

See too
Early retirement: when can you apply and what are the penalties

How the sustainability factor is born

The discussion and the perception that measures would have to be taken led to changes in the legislation.

Thus, in April 2007, during the Government of José Sócrates, Decree-Law 187/2007 was published, which brought new rules for disability and old-age pensions for beneficiaries of the General Social Security System.

Recognizing in this document that “Portugal faces the challenges posed by demographic aging and the evolution of population activity rates”new mechanisms are then created to “promote active ageing”, that is, to delay the retirement age.

Article 35 brings the novelty: the sustainability factor, that is, a cut, defined annually by the Government taking into account the average life expectancy from 65 years and whose value will later be reflected in the amount to be cut in the reforms requested in advance.

calculation formula

The initial calculation formula used, as a reference, the average life expectancy in 2006. But in 2014, in the Passos Coelho Government and still in the austerity period, this indicator was changed. The date used as a reference became the year 2000, which further aggravated the penalty.

Thus, and in accordance with the law, the sustainability factor results from the relationship between the average life expectancy in 2000 and that verified in the year prior to the application for the pension.

  • FS = EMV(index 2000) / EMV(index year-1)

On what:

  • FS is the sustainability factor;
  • EMV (2000 index) = average life expectancy at age 65 verified in 2000;
  • EMV (year-1 index) = the average life expectancy at age 65 verified in the year prior to the start of the pension.

So, applying these accounts to 2023the values ​​would be:

  • 16.63 (EMV 2000) / 19.35 (EMV 2021/22)

The sustainability factor is thus 0.8594, which represents a cut of 14.06% in the pensions of those who request early retirement.

Sustainability factor in 2023 and previous years

The sustainability factor in 2021 cut the value of early renovations by 15.5%. In 2022, this value decreases to 14.06%, a reduction of 1.44 percentage points, the first reduction since the sustainability factor was created in 2008. In 2023, the cut in pensions due to the sustainability factor is 13.83%.

Even so, the value of the sustainability factor is far from the values ​​of 2013, when it stood at 4.78%. From that year on, the calculation formula changed, and the average life expectancy in 2000 was used as a reference and not in 2006, as until then, with a sharp rise to 12.34 being registered in the following year. %.

The fact is that, since it began to be applied in 2008, the sustainability factor has been rising, as a result of the constant increase in average life expectancy. Only from 2022 onwards, and due to the decrease in average life expectancy, was there a first decline in this penalizing factor for early retirement.

Year penalty
2023 13.83%
2022 14.06%
2021 15.50%
2020 15.20%
2019 14.67%
2018 14.50%
2017 13.88%
2016 13.34%
2015 13.02%
2014 12.34%
2013 4.78%
2012 3.92%
2011 3.14%
2010 1.65%
2009 1.32%
2008 0.56%
  • Electronic Republic Gazette: Ordinance No. 292/2022of 9 December – Establishes the normal age for access to the general social security regime old-age pension in 2023.

Article originally published in July 2019. Last updated in December 2022.

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