Consumer protection association Deco says it’s urgent to save for retirement, given the predictable decline in pensions, warning that retired households have an average of four active loans and a high loan-to-income ratio.
In a statement sent to Lusa on World Savings Day, which is being celebrated today (October 31), the organisation stressed that “saving for retirement in Portugal is increasingly urgent, especially as average life expectancy continues to increase and the value of pensions to decrease”.
According to Deco, “in view of the fall in state pensions, it is imperative that the Portuguese change their financial planning and that new social protection policies are created”.
The association pointed out that although this year pensions have seen a maximum increase of 3.85%, according to the legal bracket updates, the European Commission’s most recent projections indicate that “the replacement rate of pensions in Portugal will fall dramatically”.
Thus, according to the Ageing Report 2024, quoted by Deco, “the average national pension is expected to fall from 69.4% of final salary to 38.5% in 2050, if no restructuring of the Social Security system is implemented”.
For this reason, Deco reiterated, “it is essential to plan for retirement to ensure that you will have a decent standard of living, similar to that of your working years”, stressing that “saving for retirement should be seen as an objective throughout your working life, starting as soon as you enter the labour market”.
Deco also said that saving for retirement should include “progressive tax incentives, transparent products and financial education accessible to all ages“.
For the consumer protection association, “reforming the way people think about retirement” means “transforming fear of the future into a culture of preparation and security”.
Deco recalled that ageing and low birth rates threaten the sustainability of the pension system, pointing out that “many Portuguese don’t have complementary savings and don’t know how their future pension works”.
According to the association’s data, “retired households still have an average of four active loans”, worth around €20,000, and credit cards worth around €6,000.
The association also revealed that monthly instalments total around €680, compared to an average net income of €1,150, “which represents an effort rate close to 60%, well above the recommended limit of 35%”, showing the “high financial vulnerability of those who retire without any savings of their own”.
Deco believes that it is necessary to implement financial literacy and protection programmes for the future.
The association also advocated the creation of “progressive tax incentives” for all income brackets, making savings more accessible, the promotion of “simple, clear and transparent savings products, without hidden fees” and the development of “financial inclusion policies”.
Deco also called for a reduction in the tax burden on term deposits and called for the creation of “awareness-raising campaigns that explain the importance of saving from an early age, using real and accessible examples”.
Source: Lusa
