Following an agreement signed on October 10, 2006, between the Portuguese government and labour organizations, as of January 1, 2007, retirees will have their pensions calculated on their overall contributions during their career. This replaces the current system calculation method that is based on average earnings over the best 10 of the last 15 years of contribution.
The immediate effect of the new formula will be a reduction in the amount of the retirement pension in 2007. But the pension will fall even lower from 2008 onwards due to the introduction of a new factor: indexation of pensions to life expectancy. According to the experts, this last factor alone will lead to an average reduction in the first pension of 0.5% a year, until 2030.

In order to reduce the impact of the changes, three different transition schemes have been agreed. These depend on the year that taxpayers started contributing to Social Security and on when they will retire. However, all those who started contributing to social security in 2002 and beyond will have retirement benefits based on their overall contribution career.

In addition, employers, labour organizations and the Portuguese government have agreed that state pension increases will be indexed in future in line with GDP, and no longer linked with the minimum national salary.

Here are some additional important points to note about the new system:

Best years
To protect longer contribution careers, the reference for the calculation of retirement benefits will be the best 40 years of contributions.

Early retirement
The early retirement age is raised from 55 to 57 years of age. People who have already taken early retirement are not affected.

Those who take early retirement (only possible for those with over 30 years of contributions and after age 55) will face a penalty of 0.5% per month.


No pension increases will be granted to pensioners receiving over EUR 4,630.80 per month (equivalent to 12 times the minimum national salary).

Those who continue to work after age 65 will receive a bonus of 1% per month.