Complementary Schemes of Collective Initiative

Voluntary participation

• Employees and members of statutory boards, in some cases based on collective agreement.
• Self-employed workers (trabalhadores independentes).

General finances

• Fully funded pension plans (as the rule) financed by contribution payments and capital revenues.
• Other sources of funding exist (e.g. corporation endowments).

Contribution rates

• Contributions can be paid by the employer, employees, and self-employed workers. Normally, contributions are paid entirely by the employers for occupational pension plans. There are also the so-called regimes profissionais complementares¹. These comprehend complementary benefits to the general social security scheme funded by both the employees and the employers, or they are based on self-contributions.
• Contributions are not uniform and depend on the conditions of the pension funds.

State support & incentivising strategies

• For contributions by employees/self-employed workers:  tax-deductions on contribution payments (20%) capped by maximum amounts depending on the person’s age: EUR 400 for persons under 35; EUR 350 for persons aged 35-50; EUR 300 for persons over 50; for tax benefits (benefícios fiscais), there is a global limit concerning the deductions (deduções à coleta), depending on the income brackets of IRS.
• For contributions by the employer: contribution payments are considered as workers’ revenues according to CIRS; if certain conditions are met (e.g. vested pension rights; payment as annuities), employers’ contributions to complementary schemes of collective initiative are exempt from Personal Income Tax.
• For corporations, contribution payments for pension funds are considered as costs capped by maximum limit (i.e. the amount paid cannot exceed 15% of the salary mass).

• Closed (fechados) and open (abertos) pension funds exist.
• In order to guarantee entitlements of the beneficiaries, the administration is managed by external institutions: insurance companies, mutualist associations, social solidarity foundations (fundações de solidariedade social), pension fund management companies.
• Pension plans are supervised by the ‘Insurance and Pension Funds Supervisory Authority’ (Autoridade de Supervisão de Seguros e Fundos de Pensões).

• Conditions are regulated in pension regulations at company or collective level.
• There are rules protecting outgoing workers concerning the ‘conditions governing the acquisition of rights under supplementary pension schemes’.

Pension payments

• Monthly life-long annuities or one-time lump sum payment (only possible for part of the capital).
• Pension plans can be defined benefit or defined contribution; defined benefit plans are still dominant.

Taxation and social security contributions

• Benefits resulting from contributions of the beneficiaries (and from the employer, if contributions did not fall under favorable tax treatment): (1) for lump sum payments the part resulting from contributions (capital component) is tax-exempted; gains and other returns on investment are taxed: 4% (effective rate) for contributions made before 1/1/2006, 8% (effective rate) for contributions made thereafter (20% of 2/5); (2) for annuities the part that results from contributions (capital component) is tax-exempted; gains and other returns are taxed (if it is not possible to distinguish between capital and gains, the law prescribes 15% of the annuity to be taxed at the person’s margin rate of income tax (IRS)).
• Benefits resulting from employer’s contributions: (1) for annuities, taxation depends on the person’s margin rate of income tax (IRS); there is a fiscal deduction on the total pension income; (2) for lump sum payments, 1/3 of the capital is exempted (limit: EUR 11,704.70); the remainder is taxed at the person’s margin rate of income tax (IRS); gains and other returns on investment are taxed: 4%, (effective rate) for contributions that were made before 1/1/2006; 8%, (effective rate) for contributions made thereafter.