To ensure financial stability and maintain the quality of life when you reach retirement age, it is essential to create savings that complement the pension you should receive from Social Security.

The public social protection system in Portugal and in most developed countries is based on intergenerational solidarity, that is, pensions are financed by contributions from the active population. However, the reduction in the birth rate, the growth in average life expectancy, the aging of the population and economic fragility have caused an increasing imbalance between beneficiaries and contributors, jeopardizing the sustainability of the system.

So far, the various changes recorded in the calculation of the Social Security retirement pension have translated, in practice, into an increase in the retirement age (66 years and 5 months of age in 2019) and a reduction in the pension value, which makes expectations for the next 30 years not very encouraging.

Thus, in order to avoid a significant fall in disposable income on retirement, it is essential to plan private savings in a timely and gradual manner, which will make it possible to constitute a retirement supplement. Bearing in mind that, in real terms, capital loses value over time due to the effect of inflation, it is not enough to just save, it is necessary to increase that savings.

The first step will be to define a diversified investment strategy that is appropriate for the time you have until retirement age and your risk profile, being advisable to take less risk as you approach the end of your working life.

Then analyse the existing financial products on the market for retirement and the different levels of return/risk associated with them:

Personal Retirement Savings Plans: These are long-term financial products that aim at gradual savings until reaching retirement age, generating an additional supplement to the pension attributed by the State. Retirement Savings Plans take the form of insurance or investment funds, benefit from tax advantages and can be redeemed outside the conditions provided.

Unit Linked: These are long-term savings financial products, in the form of life insurance, whose assets are invested in investment funds. The yield is dependent on the decisions that the managers of the funds that compose it take, with no guarantee of invested capital or profitability. They benefit from a more favorable capital gains tax rate for applications over 5 and 8 years.

Pension Funds: These are autonomous assets intended exclusively for the financing of pension plans. Thus, the Pension Funds are a set of assets whose sole purpose is to provide for the future payment of the benefits provided for in the respective plan. They benefit from tax advantages, but the movement obeys more restrictive rules than the Retirement Savings Plans.

Finally, choose those that best suit your needs and start your retirement supplement, the sooner you start, the less savings you will need.


Start to prepare for a more peaceful future today, with Investment and Retirement Solutions from IM Gestão de Ativos.