General Social Security Scheme

Mandatory insurance

• Employees and persons carrying out activities considered equal to those of employees for the purposes of social security (such as members of statutory boards).
• Self-employed workers.
• Civil servants (only new entrants to civil service since 01/01/2006).

Voluntary insurance

• Persons of at least 18 years of age, who are able to work but who are not covered by any other mandatory social protection scheme (an additional requirement for foreigners or stateless persons is residency in Portugal for more than one year).
• Persons covered by mandatory social protection schemes which are irrelevant to the Portuguese social security system.
• Portuguese citizens carrying out a professional activity in a foreign territory and who are not covered by international social security instruments to which Portugal is bound.
• Social voluntary insurance is also pertinent to some persons in special situations (situações especiais abrangidas): social volunteers (voluntários sociais) performing unpaid activities in favour of private social welfare institutions; research fellows (bolseiros de investigação), if they are not covered by a mandatory social protection system; Portuguese mariners and watchmen who exercise an activity on ships of foreign companies; Portuguese mariners who exercise an activity on ships of common (i.e. with foreign partners) fisheries companies; volunteer firefighters; crewmen of ships registered with the International Registry of Madeira; agents of cooperation; high performance athletes (praticantes desportivos de alto rendimento); informal main caregivers.

General finances

• Mainly PAYG-financed from insurance contributions.
• A special pension reserve fund was created to increase sustainability; the ‘Social Security Financial Stabilisation Fund’ (Fundo de Estabilização Financeira da Segurança Social) is financed by surpluses of the insurance system and 2% to 4% of paid contributions (by employees) until the fund has the equivalent size to be able to make pension payments for at least 2 years. This fund is partly tax-financed by the earmarking (consignação) of tax revenues from an additional to the municipal property tax (Adicional ao Imposto Municipal sobre Imóveis, AIMI)  and from a share from tax revenues on the Income of Collective Persons (Imposto sobre o Rendimento das Pessoas Coletivas, IRC). In 2020, a new additional solidarity (tax) on the banking sector (Adicional de Solidariedade sobre o Setor Bancário) was created, and the revenues were entirely earmarked to this fund.

Contribution rates to mandatory insurance

• Fixed share of monthly gross earnings (total of 34.75%, of which 20.21% are assigned to old age pensions), without contribution assessment ceiling.
• Contributions are shared between the employer (23.75%) and the employee (11%). Special provisions for contribution payments (rates and/or modalities) apply to distinct occupational groups (e.g. favourable conditions for non-profit institutions or weak economic sectors).
• Additional rates may be payable to special funds created prior to the establishment of the unified social system (e.g. wool industry workers, Fundo Especial de Segurança Social do Pessoalda Indústria de Lanifícios).
• For self-employed workers, the contribution rate is 21.4% (or 25.2%, which is applicable to individual entrepreneurs and holders of a single-member limited liability company and respective spouses). Contracting entities are required to pay contributions for economically dependent self-employed workers: 7%, if the self-employed person received from the same source more than 50% to 80% of his/her income during the same calendar year (i.e. situation of economic dependency); 10%, if the self-employed worker received from one contracting entity more than 80% of his/her income.
• There are two different situations for self-employed workers as regards the definition of income defined as relevant for contribution payments: (a) for self-employed workers with organised accounting the relevant income is the amount of taxable profit calculated in the immediately preceding calendar year; (b) for self-employed workers without organised accounting (simplified regime) the relevant income is determined according to the income earned in the three months immediately preceding the month of the quarterly earnings statement submission; this is 70% of the total value of services provision; 20% of the income from the production and sale of goods; 20% of the total value of service provision regarding guest accommodation and similar activities, catering and sale of beverages. The monthly contribution base corresponds to 1/3 of the relevant income calculated in each earnings statement submission period.

Contribution rates for voluntary insurance

• As a rule, 26.9% of the contribution base (covering old age, invalidity and death); informal main caregivers pay 21.4%.
• Special contribution rates guarantee enlarged coverage: 27.4% (covering old age, invalidity, death and occupational diseases) e.g. for social volunteers; and 29.6% (covering old age, invalidity, death, sickness, occupational diseases, and parenthood) e.g. for research fellows.
• As a rule, the contribution base can be chosen freely within a predefined range (of 10 brackets: with thefirst bracket being 100% IAS and the last being 800% of IAS. The Social Support Index (Indexante de Apoios Sociais, IAS) is EUR 438.81 in 2020.

Taxation of contribution payments

• Contributions for social security are deductible for employers (IRC) and employees (CIRS).
• For self-employed workers, contributions are of limited deductibility (CIRS – simplified regime): the deduction amount corresponds to the portion of contributions that exceed 10% of the gross income stemming from the activities included therein. For the self-employed with organised accounting, likewise to employers and employees, contributions for social security are deductible.

• The  ‘Institute of Social Security’ (Instituto de Segurança Social, I.P.) manages this scheme; the payment of the benefits is managed by one of its services (Centro Nacional de Pensões).
• The ‘Institute of Financial Management of Social Security  (Instituto de Gestão Financeira da Segurança Social, I.P.) is in charge of the management of financial resources, incl. the contribution payments.
• The ‘Social Security Financial Stabilisation Fund’ (Fundo de Estabilização Financeira da Segurança Social) is managed by the ‘Institute of Management of Capitalisation Funds of Social Security’  (Instituto de Gestão de Fundos de Capitalização Financeira da Segurança Social).

Qualifying conditions

• Minimum contribution period (prazo de garantia): 15 years (incl. assimilated, non-working periods, such as maternity or paid unemployment); one year of contribution record is at least 120 days of contribution payments per year (years with less than 120 days can be aggregated); for persons with voluntary insurance, the minimum contribution period is 144 months.
• The statutory retirement age (idade normal de acesso à pensão de velhice, INAPV) is dependent on the average life expectancy. In 2020, the retirement age is 66 years and 5 months and increases by 1 month in 2021.
• The standard retirement age remains 65 years for specific occupational groups (e.g. civil aviation pilots), if the law forbids to continue the activity beyond this age and the person has worked in this capacity at least for the five calendar years (anos civis) immediately before the year of the beginning of the pension.
• The standard retirement age is flexible and can be reduced (idade pessoal de acesso à pensão de velhice, IPAPV)  dependent on the years of registered earnings, without negative adjustments; for persons with 40 years of registered earnings, every additional year of contributory record reduces the statutory retirement age by 4 months (minimum retirement age: 60).
• Special retirement ages apply for persons carrying out strenuous activities (such as air-traffic controllers: age 58; embroiderers from the Island of Madeira: age 60; sea fishermen: age 55).

Early retirement

• Early retirement is available for persons with long contributory careers (it is age 60 for persons with 48 years of contribution payments; it is age 60 for persons with 46 years of contribution payments, if he/she has entered the scheme before age 17) without negative (permanent) adjustments to the pension benefit.
• Early retirement is available in case of long-term unemployment for persons who have exhausted unemployment benefits and who were involuntarily unemployed, and who were at the date of unemployment: (1) at least 52 years old with 22 years of registered earnings (earliest age of retirement is 57), with negative (permanent) adjustments to pension benefits (0.5% per each month of early retirement before age 62 plus application of the sustainability factor, i.e. 0.8480, which equals 15.2% in 2020); (2) at least 57 years old with 15 years of registered earnings (earliest age of retirement is age 62, with application of the sustainability factor, i.e. 0.8480, which equals 15.2% in 2020, but without other negative adjustments to pension benefits); if the unemployment has been agreed to by the person, benefits will be temporarily reduced only until the normal retirement age is reached.
• Early retirement with higher negative (permanent) adjustments to pension benefits (0.5% per each month of early retirement) is available for person who are: (1) 60 years old and, despite that age, have completed at least 40 years of registered earnings; (2) at least 61 years old and who have at least 40 years of registered earnings, entailing in this case also the application of the sustainability factor (i.e. 0.8485, which equals 15.2% in 2020).

Deferred retirement (pension bonus)

• Retirement can be deferred with positive (permanent) adjustments to pension benefits in the form of a so-called ‘pension bonus’ (maximum of 92% of the remuneration of reference); positive adjustments vary with contribution record with a maximum of 1% per month for persons with a 40-year contribution period (0.33% per month for 15 to 24 years of contributions; 0.5% for 25 to 34 years of contributions; and 0.65% for 35 to 39 years of contributions).

Combining employment & retirement

• Termination of employment is not a precondition for claiming pension benefits.
• Employment is permitted without earnings limit after retirement.
• It is forbidden to have been granted early retirement and to continue employment at the same company and enterprise for the subsequent 3 years after accessing the pension benefit.
• Retired persons who continue to work and pay contributions can increase their future pension benefit (the social security system previews an accrual of the amount of the pension).

Pension benefits

• Earnings-related benefits, paid 14 times per year (incl. 12 monthly payments, one holiday payment, and one Christmas payment).
• Earnings-related benefits are based on whole working career (maximum: 40 years).
• Maximum amount: no specification in law regarding fixed maximum amount of pension benefits; the amount is levelled due to rules regarding the benefit calculation, which incorporates a maximum of 92% of the remuneration of reference.
• Minimum amount: a minimum pension amount is guaranteed by the social complement (complemento social).

Benefit calculation

• For persons enrolled in the scheme since 01/01/2002, the pension amount is based on the multiplication of the following factors: the reference earning, the pension accrual rate (taxa global de formação da pensão), and the sustainability factor (applicable if persons chose to retire early).¹
• Reference earning (RR): TR/(n x 14); with TR representing the uprated yearly earnings over the entire contributory career (total das remunerações anuais revalorizadas de toda a carreira contributiva); n is the number of years with registered earnings (maximum: 40 years).
• Pension accrual rate: number of calendar years with a record of relevant remunerations for the calculation.
• Sustainability Factor: 0.8480 (15.2% in 2020).
• The pension benefit calculation formula depends on the years of contributions: (a) up to 20 years of contributions (hypothesis 1): P (pension amount) = RR x (2% x N); (b) more than 20 years of contributions (hypothesis 2): The pension accrual rate is variable (between 2% and 2.3%), taking into account reference earnings brackets; it is indexed to the reference Social Support Index (between 1.1 and 8 times or more this amount).
• This latter regime (hypothesis 2) considers the full-career average earnings, rectius, the best 40 years, contrasting with the traditional regime (the best 10 years of the last 15 years). One should note that the rule still applies in part to those who signed up to social security until 31/12/2001.
• For the benefit calculation, the past reference earnings are uprated. 
• Indexation: adjustments of pension benefits are based on the real GDP growth, prices measured by the consumer price index (without housing), and the amount of pensions using IAS (Indexante de Apoios Sociais) as reference.

Taxation and social security contributions

• Pension benefits are subject to income tax according to general tax rules (income category: H).
• Pension benefits are not subject to social security contributions.