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In November 2001, following months of negotiations, a social security reform agreement was signed by the Portuguese social partners and government. Changes to the calculation formula for pensions and a provision allowing employees to invest their pension contributions, above a certain ceiling, in private schemes, are the main points of the agreement and were the most difficult to negotiate. Despite the fact that the CIP industrial employers' organisation has not signed the agreement and the CGTP trade union confederation has not signed the annex on contributions to private schemes, the accord will mean significant changes to the social protection system.
The implementation of some of the most important aspects of the basic social security law, approved in 2000 (PT0007100F), has been the subject of debate among the social partners in the Standing Commission for Social Concertation (Comissão Permanente de Concertação Social, CPCS), as part of the social dialogue process between the government and social partners, which was launched in January 2000 (PT0001179F). Social security has been an issue of debate among the social partners at least since a 1984 law on the issue, but the objective of the current negotiations has been to reach an agreement that introduces structural changes to the social security system (PT0111102N).
In November 2001, the social partners and the government formalised a deal regarding the modernisation of the social protection system, which will come into effect in January 2002. The key point of the text, which has now been signed by the social partners, is a new calculation formula for old age pensions. According to specialists, the new method will guarantee the solvency of the social security system for decades to come.
Retirement pensions are in future to be calculated on the basis of the whole of an individual's contributing career, instead of only the best 10 years' earnings out of the last 15. Accordingly, people will have to have made social security payments for 40 years in order to be entitled to a maximum pension, though the pension will still not exceed 80% of average remuneration during the period of active employment.
The establishment of a ceiling of 12 times the monthly minimum wage on the income subject to old-age pension contributions, above which employees would be free to make contributions to a private or cooperative pension scheme instead of the state system, proved a difficult point during negotiations and ended up being included as an annex to the main agreement.
The agreement was signed by the government, the Portuguese Trade and Services Confederation (Confederação do Comércio e Serviços de Portugal, CCP), the Portuguese Farmers' Confederation (Confederação dos Agricultores Portugueses, CAP), the General Confederation of Portuguese Workers (Confederação Geral dos Trabalhadores Portugueses, CGTP) and the General Workers' Union (União Geral de Trabalhadores, UGT).
The Confederation of Portuguese Industry (Confederação da Indústria Portuguesa, CIP) took part in negotiations and made its own suggestions. During the final stages of negotiations, it demanded a 1% reduction in employers' social security contributions. However, the other social partners argued that this would undermine the future sustainability of the system, depriving it of many billions of escudos in contributions. The outcome was that CIP did not sign the agreement. However, it intends to be included in the accord's monitoring commission.
CGTP, which has never accepted the possibility of recourse to private social security coverage, rejected the proposal that enables employees to opt to pay their pension contributions above those levied on 12 times the minimum wage into private schemes. It was therefore decided that this provision should be contained in an annex to the main agreement
The press has described the agreement as one of the most important pacts ever negotiated through social concertation .