Savings are one of the main tools to guarantee financial stability and provide us with a dignified retirement. However, in Portugal, there has been a discourse hostile to long-term savings, conveying the idea that there is no need to worry about future pensions, as Social Security is here to provide them. This message, combined with the almost non-existence of tax incentives for private savings, has resulted in a decrease in the savings of Portuguese families, which are, for the most part, parked in deposits.
The reduction in stimulus has hampered people’s ability to save for the future, leaving the space to do so increasingly limited. For example, when the Retirement Savings Plans (PPR) were created they had tax incentives and attracted savings for retirement, but over time, these incentives were reduced until, in 2014, they were practically eliminated.
And despite being an important and significant product, due to the pandemic, the increase in inflation and the increase in interest rates on housing loans, people were allowed to make refunds based on these reasons, without any tax penalty, which has also contributed to this product being used less and less for its initial objective – saving for retirement.
As a result of the successive changes to the PPR that have made them an excellent medium-term savings instrument that does not make sense to eliminate, the most appropriate solution to finance a worthy retirement is to encourage products that are exclusive to retirement, such as the Individual Product European Reform Policy (PEEP). This financial solution, provided it is accompanied by an appropriate tax incentive, satisfies the desires of operators and citizens and as an effective savings product for retirement.
In Portugal, the national PEPP regulation already had a law proposal approved by the government and sent for discussion and approval by the Assembly of the Republic, but with the fall of the government this bill has to restart the approval process, with the new government having to present a new diploma to the Assembly of the Republic.
But it is we, the Portuguese, who are most affected by this delay. It is essential to recognize the urgency of creating conditions so that families can save for their retirement, and also of reviewing fiscal stimuli, with the aim of encouraging long-term savings. The implementation of PEEP in Portugal would be an important step towards achieving this objective and contributing to a dignified retirement for everyone, contributing to the financial sustainability of families – especially at the time of retirement – and, at the same time, boosting the capital market. Perhaps unrealistic, but I hope that Portugal can still host PEEP this year.
We also cannot forget the Green Paper on the pension system, which has been prepared for almost two years by a specially created committee with the aim of presenting a “proposal that strikes a balance between the adequacy of benefits and financial sustainability” of the Social Security system. The preliminary version was delivered to the previous government’s executive, and in the meantime integrated into the transition of portfolios of the new government, with the hope of contributing to a broad debate in society on the topic of Social Security sustainability.
I conclude with an appeal to three different entities: the competent authorities, requesting that tax incentives be reassessed to encourage long-term savings; to companies, so that they promote the implementation of retirement plans for their Employees; and to the Portuguese, who, if they wish to have good pensions, should increase their retirement savings with the aim of being used after their active life and that, for this purpose, in addition to tax incentives, there is still an important path strengthening financial literacy.
