After all, how does early retirement work? What are the cuts?

ANDm Portugal currently exists various early retirement schemes. In practice, they are ways of leaving work early before reaching the legal retirement age. 

In addition to the longterm unemployed, the most important are: anticipation by flexibility, accessible to people over 60 years of age and 40 years of discounts, but with a 0.5% penalty for each month in anticipation of the normal retirement age in force and the sustainability factor.

Early retirement is still possible for those who, while being 60 years old, reach at least 40 years of discounts. In this case, there is room for a 0.5% penalty for each month of anticipation, not being applied the cut by the sustainability factor.

Access to retirement before normal age is still accessible for people with long careers, without any penalty, provided that they are aged 60 years or older and 48 years or more of discounts or have 46 or 47 years of discounts and started work before the age of 17.

Changes to “avoid double” penalty are suggested

The Working Group created to study social security reform suggests that the early pension penalty should be reformulated, since they consider that there is a double penalty between monthly cut and sustainability factor.

The conclusion is contained in the report “Reform Pensions in Portugal – For a Sustainable, Adequate and Fair System – a Contract between Generations”, presented on Tuesday by the working group set up by the Government to “propose measures to reform social security”.

In the document, to which Lusa had access, the working group led by economist and professor Jorge Bravo recommends “that the penalty for early retirement be reformulated so as to avoid double counting between monthly penalty and sustainability factor”.

According to the calculations in the report, the monthly penalty of 0.5% is “equivalent to about 6% per year”, while the sustainability factor, set at 0.8237 for pensions initiated in 2026, corresponds to an additional reduction of 17,63%.

“ Multiplicatively combined, the two mechanisms produce a total reduction that can go far beyond that which would result from any of them alone,” they added, stressing that “in the opposite direction, deferred pension subsidies range from 0.33% to 1.00% per month – from 3.96% to 12% per year – depending solely on the contribution career, and not on the actual age at which the deferral occurs”.