PORTUGUESE STATE pensions will take up a massive 13 per cent slice of the country’s Gross National Product by 2020, according to a consultant. In line with other European countries, people are living longer but in Portugal the effects will be felt much sooner than the EU average of 2040.
It also means that, according to the figures, the amount spent by the government on state pensions reflected in terms of a percentage increase will skyrocket by 34 per cent compared to the year 2000, reports Chris Graeme.
These were the startling statistics revealed by consultants CB Richard Ellis in their most recent study, entitled ‘The Pension Crisis and the European Property Market’.
In 2000, there were in Europe less than 25 citizens receiving pensions per 100 head of working age population. By 2050, that ratio will be very different with one pensioner for every member of the adult working population. Improved medical advances and treatment, better living conditions and a healthier lifestyle mean that around 50 per cent of the adult population (discounting students, the unemployed, housewives, the sick and children) will be retired.
According to predictions, the peak of this crisis will occur around 2030-2050, when the total annual European investment needed to cover pensions will reach a whacking 150 to 300 billion euros.
CB Richard Ellis has shown that the pension income of the 15 original EU member states is essentially supported by the state in pay-as-you-earn schemes. This system worked well when the birth rate was high and the death rate corresponded, but, in the next 40 years, the number of contributors is set to decline as people have less children and infertility increases.
For this reason, there is a strong need for people to top up their state pensions with pension plans or saving schemes. Governments will also have to take exceptional measures such as raising social security, national insurance contributions or changing the way state pensions work.
CB Richard Ellis believes that investing pension funds in the property sector could be one of the many measures. The investment could be directly made by the public sector establishing pension fund reserves, as was recently done in Spain and France.
The other alternative is to encourage the public to buy into private pension schemes as was done in the UK and Italy, with mixed results owing to the precarious and speculative nature of investment funds and share markets.