We associate retirement with the end of professional life, but we don’t have to see it that way. In Portugal it is legally possible to continue working while earning an retirement pension and we explain how.
In Portugal, the retirement age in 2023 and 2024 is 66 years and 4 months. This pension is, nothing less, than an amount paid every month to replace wages at work. The amount differs from person to person, depending on the social protection system for which you have withdrawn, the discounts you have made and the age at which you retire.
Anyone who meets the stipulated age in force can apply for the old-age pension or you can also request the early pension by:
- Long-term unemployment;
- Age flexibilization regime;
- Long contributory careers;
- Early retirement age regime.
It is important to note that there is also a social retirement pension, for those who have not deducted enough years for Social Security and have low incomes, however the value is lower compared to those who have more than 40 years of deductions.
Currently, the social retirement system in Portugal is based on a pay-as-you-go model. This means that the number of active workers contributes to those currently in retirement. This model is no longer sustainable, breaking down when there are more pensioners than workers.
For the system to be considered balanced, there must be at least three workers for each pensioner. Given that we have an increasingly aging country and more emigration by young people, with a tendency for this scenario to worsen, we may be taking big steps towards a possible rupture, with it being more and more likely that future generations will lose benefits and see the value of their renovations drop dramatically.
What are the exceptions?
As previously mentioned, according to the law, it is possible to continue working after retirement while still receiving the old-age pension, except in the following cases:
- If you are a pensioner due to absolute disability.
- If you applied for early retirement. In this case, it is not possible to receive any income from work carried out in the same company during the three years following the date of access to the pension.
If you choose not to respect these rules, it is possible that your right to a pension will be withdrawn during the period in which you are working and you will still be obliged to return the benefits paid by Social Security and to have to pay a fine.
Where and how can I apply for an retirement pension?
The request for retirement can be guaranteed three months before the date on which you intend to retire. You can do this in person, through the Social Security services or at the National Pensions Centre, by mail to Social Security, or via online, through Social Security Direct.
The retirement pension is required by completing the Mod.RP5068-DGSS form and submitting the following documents:
- Beneficiary’s valid Identification Document (Citizen Card, Identity Card, Civil Registry Certificate, birth certificate or passport);
- If the beneficiary does not know how to sign, the valid Identification Document of the person who signed the application is required;
- Taxpayer Number (NIF);
- Documents proving the period of compulsory military service, if you have not requested the counting of the period of military service;
- Document proving the Bank Identification Number (NIB/IBAN) with the name of the applicant as account holder.
Is possible to work after 70 years of age?
Yes, if the employer allows it, but be aware that the contractual relationship will change. The employment contract for an indefinite period (or without term) necessarily expires within the 30 days following the employee’s 70th birthday and automatically becomes a fixed-term contract (term contract), for six months. If the employer wishes to terminate the contract, he only has to notify the employee 60 days in advance, not having to pay him any compensation under this contract, in addition to the proportional ones corresponding to holiday and Christmas subsidies.
Tax Obligations
Is it mandatory to continue to pay for Social Security?
It is not mandatory to continue making discounts, however, if you choose to maintain Social Security contributions you are entitled to an increase in your pension. This is valid for pensioners due to old age or relative disability*. Pensioners due to absolute disability** are excluded, since, according to the law, they cannot engage in any type of remunerated activity.
* We are talking about relative disability when the worker cannot obtain, from his current profession, more than a third of the remuneration of his usual salary. Nor is it foreseeable that, in the performance of his last profession, he will recover more than 50% of the corresponding remuneration within a period of three years.
**In the case of absolute disability, the worker must present definitive incapacity for any and all work or profession and not just the one he is carrying out when the incapacity is verified. Furthermore, it cannot be assumed that this situation will change until the legal age of access to the old-age pension.
Retirement Pension and IRS
If you choose to continue working at the same time as you receive your retirement pension, you must declare both types of income to the Treasury, except if the sum of income from dependent work and the pension is equal to or less than 8,500 euros and none of them is subject to withholding tax. In this case, you are exempt from submitting the IRS declaration.
If you receive a retirement pension and income from dependent work, you must complete Appendix A of the IRS Model 3 declaration. If you issue green receipts, it is Appendix A for pensions and Appendix B for income from self-employment that you must complete.
So that there are no surprises, pay attention if both incomes are exempt from withholding tax. Their sum may result in an amount above the minimum existence and, if so, the income is no longer exempt from VAT. This minimum amount, up to which there is tax exemption, rose in this year from 2023 to 10,640 euros.
Continuing to be an active worker while receiving your retirement pension offers you a better quality of life. On the one hand you maintain an active lifestyle, on the other hand you can increase your monthly income as you receive two payments. Not forgetting that you can still receive an increase if you choose to continue to deduct for Social Security. Learn more with this practical guide from Social Security.
