More than 10% of new old-age pensioners in Portugal (public Social Security system) “continued to work after the start of pension payments”, reveals a new study by the Bank of Portugal (BdP), released in advance this Friday, December 12th, and which is part of the economic bulletin to be released on December 19th.
The premium associated with this is enormous: pensioners who continue to work receive an increase of almost 60% in their combined monthly income (old-age pension and salary). A substantial increase because the base, the value of the average pension, is very low: it did not even reach 600 euros in the last six years.
The weight of this group of people who, upon reaching retirement age, choose, for example, to continue to have a paid job (because they feel good and want to remain active) or need to do so to earn a salary (because the retirement value is low and does not reach the end of the month), has been increasing substantially since 2018, at least.
According to the study “Old-age pensioners in Portugal: an analysis with microdata”, which uses a huge database from Social Security itself, that year, in 2018, 8.4% of new pensioners continued to work after retiring. Six years later, in 2024, this universe expanded to 10.3% of the total number of new retirees.
Seen another way, of the 111 thousand new pensioners registered in 2024, 11.5 thousand continued to work for others, accumulating salary and pension. And around 34 thousand people retired after the legal retirement age, which last year was 66.3 years old.
Everything considered (including early retirements, special regimes that allow reaching legal age earlier without penalties, very long careers), the normal average effective retirement age in Portugal rose to 65.4 years in 2024, says the BdP.
With the exception of the two post-pandemic years (2022 and 2023, in which the normal age for accessing old-age pensions fell following the brutal increase in mortality among the elderly), the trend resumed in 2024 and 2025 and 2026 will not be exceptions.
The pressure or incentive to continue working in old age translates into an increase in the length of working life which, for the central bank economists who prepared the study (Cláudia Braz, Sharmin Sazedj and Lara Wemans), “suggests some success in measures to encourage the extension of working life”.
The study published by BdP recalls that “the public pension system provides incentives for prolonging working life, either by postponing retirement or by continuing work after retirement”.
“In the first case, there is a bonus that can amount to 1% for each complete month of work after the legal retirement age. This increase is cumulative and permanent and cannot exceed 92% of the best reference salary that served as the basis for its calculation.”
“In the second case, the amount of the pension is reevaluated annually and is increased by 2% of the monthly salary received during the accumulation period”, indicates the investigation.
Average salary premium of almost 60% for those who continue to work
Other evidence emerging from the study is that the income premium for pensioners who want or need to continue working is substantial.
Those who accumulate a salary with a pension (new pensioners in 2024) earn 342 euros more per month than those who retire. The combined income (old-age pension and salary) amounts to 933 euros per month, 58% more than those who do not work.
“Analysis of the average pension also reveals a significantly higher dispersion among new pensioners who remain in the labor market, with all moments of the distribution above those observed among those who cease activity. On average, in the period 2018–2024, new pensioners who continue to work receive 933 eurosface a 591 euros among those who do not do so”, found the BdP.
Advance penalties can reach 20% or more
On the other hand, there is an entire system set up (law) that greatly penalizes the anticipation of reform.
The BdP states that “the public pension system applies significant penalties to early retirements”. It says that “the sustainability factor, which in 2024 represented a reduction of 14.67%, applies to all beneficiaries who retire before the legal age, except those who, at age 60, have at least 40 years of discounts.” “There is also a penalty of 0.5% for each month of anticipation and a reduction in the training rate when the contributory career is less than 40 years. In total, an anticipation of one year can translate into a reduction of more than 20% in the value of the pension, and the effect of the lower training rate may also increase”.
However, despite the aforementioned growth in the number of those working beyond retirement age, the study indicates that, “despite the convergence of the average retirement age to the legal retirement age, a significant part of new pensioners continue to retire before the legal age”.
In 2024, “38% of new pensioners started their pension before the legal age, 32% did so exactly at that age and the remaining 31% after it. It should be noted, however, that some of these pensioners may not have been covered by the penalties, given that there are flexible retirement age regimes and specific early retirement possibilities for very long careers”.
“The trend observed in recent years points to a gradual reduction in the proportion of early retirements and an increase in postponed retirements, which contributes positively to the financial sustainability of the system”, explains the work of Banco de Portugal.
According to the central bank governed by Álvaro Santos Pereira, in Portugal, “there are currently around 2.5 million old-age pensioners from public schemes (23% of the total population), of which 2 million belong to the Social Security system and 440 thousand to the Caixa Geral de Aposentações (CGA), a subsystem closed to new registrations that covers public servants hired until the end of 2005”.
“Within the scope of Social Security, several regimes coexist, although the vast majority of old-age pensioners (97%) fall under the general contributory regime”, which was the universe considered in this study from the “Policies under analysis” series.