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PROPOSED LAW NO. 102 /X

Exhibition of Motives

In the Programme of the XVII Constitutional Government was taken up, with a view to the improvement

of the working conditions of the labour market, the need for the retribution

minimum monthly guaranteed no longer to be the determinant determinant of fixation, calculation and

updating of the social supports of the State and, well thus, of any other expenses and

recipes by this one carried out or charged, thus allowing this to fulfill your role

of regulation of labour relations. This change was, however, already the subject of

negotiation and agreement established between the Government and the social partners, at the headquarters of

Standing Committee on Social Concertation, in the framework of the discussion there concluded in

around Social Security Reform.

This being the case, it matters to replace the guaranteed monthly minimum consideration (or, in certain

cases, through it, the social pension of the social security solidarity regime) by

a new indexing of fixation, calculation and updating of those expenses and revenues, with

Autonomous and previously determined rules of definition and updating. The present

proposed law thus provides for the establishment of the Indexing of Social Supports (IAS), the value of which

initial will be based on the value of the guaranteed monthly minimum consideration in force in the year of

2006, updated by the consumer price index (CPI) without housing,

corresponding to the average variation of the last twelve months, available at the date of 30 of

November 2006, adjusted as a function of the actual growth of Gross Domestic Product

referring to the year ended in the third quarter of 2006. It matters to note that the IAS

takes now by initial reference the value of the gross monthly minimum consideration, so

the percentages of indexation fixed (inter alia, in Annex, in the indicative title,

for major social benefits), do not entail any decrease in the respective

value. In addition, they define which objective indicators from which to be

proceed to future, annual, IAS update, namely: the real growth of the Product

Gross domestic (GDP) and the average variation of the last 12 months of the Price Index in the

Consumer (IPC), without housing, available on November 30 of the year before the

reporting the update.

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Simultaneously, of this proposed law results in the establishment of new rules,

objective and clear, updating of pensions and other benefits of the system of

social security, rightly attending to its evident link to the IAS. The definition of this

objective framework of updating, avoiding arbitrariness, will have as a referential the

Consumer Price Index (known and not estimated), owing to the variations in

relation to this benchmark being established, according to recent developments of

determinant variables for Social Security revenues, namely evolution

of the Portuguese economy. The rules to be established must take into account their impact on the

sustainability of the social security system, but, still, guarantee the reposition and

even gain of purchasing power for the average and low pensions. For the pensions of

higher amount, the maintenance of purchasing power should be guaranteed when

if they check for favourable conditions from the point of view of economic growth.

They still remain the principles enshrined in current legislation, such as the rules

exceptional updating in some pension schemes, as well as the rule of no

update on pensions in the year of its grant.

The new update rule now proposed should therefore go on to invigorate from

January 1 each year, in line with the year-on-year increase in wages and having in view

a harmonisation with the budget cycle. This mechanism must, in any case, be

reassessed quinquenally, depending on its suitability for the proposed objectives

(defence of the purchasing power of pensions and financial sustainability of security

social).

Giving further achievement to the envisaged in the Programme and to the agreed with the partners

social, efective, since already, also, the principle of nominal freezing of the

high pensions, that is, that exceed the value of 12 IAS. In this way, if you seek to give

a contribution to the moralization of the system and ensure the efectivisation of social justice.

However, and in the respect of the principle of contributivity, it is guaranteed that this limit

is not applicable to pensions, where of the calculation made according to the new ones

rules approved by the Decree-Law No. 35/2002 of February 19 (which considered the

whole of the contributory career), result in value higher than that limit.

Considering, finally, that the updates of the pensions, in the terms of the schedule in the

proposal, will produce its effects on the date of January 1 of each year, and listening to

that up to here pensions have been the subject of updating in the month of December, it matters,

in the first year of application of the diploma bridging that differential. Hence prep,

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at the time of the first update in the framework of the diploma duration, i.e. in

January 2008, which the update arising from the application of the rules now here

predicted to be increased by an extraordinary increase, equivalent to 2/14 of the increase

normal of the pension.

Thus:

Under the terms of the paragraph d) of Article 197 (1) of the Constitution, the Government presents to the

Assembly of the Republic the following proposal for a law:

CHAPTER I

Object and scope

Article 1.

Subject

This Law institutes the Indexing of Social Supports (IAS) by fixing the rules of its

update and pensions and other benefits assigned by the security system

social.

Article 2.

Scope

1-The IAS constitutes the determinant determinant of the fixation, calculation and updating of the

supports and other expenses and revenue from the Central State Administration, das

Autonomous Regions and Local Authorities, whatever their nature,

provided for in legislative or regulatory acts.

2-For the effect of the provisions of the preceding paragraph, they are relevant to the supports granted and the

recipes charged to natural or legal persons of a private nature and the

public entities of a business nature.

3-The provisions of paragraph 1 shall be without prejudice to the existence of other rules of indexation, in

relation to acts for the granting of supports and realization of other expenses or

collection of revenue from the Autonomous Regions and Local Authorities resulting from the

respective competences of their own.

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CHAPTER II

Amount and update of the IAS

Article 3.

Amount

The value of the IAS for the year 2007 is fixed by joint poration of the members of the

Government responsible for the areas of Finance and Labour and Social Solidarity,

having on the basis of the value of the guaranteed monthly minimum consideration in force in the year of

2006, updated by the consumer price index (CPI) without housing,

corresponding to the average variation of the last twelve months, available in 30 of

November 2006.

Article 4.

IAS update reference indicators

1-The value of the IAS is updated annually with effect from the January 1 of

each year, taking into account the following reference indicators:

a) The real growth of Gross Domestic Product (GDP), corresponding to the average of the

rate of the average annual growth of the last two years, ended in the third

quarter of the year prior to the one to which the update or in the quarter

immediately preceding, if the one is not available at the date of 10 of

December;

b) The average variation of the last 12 months of the Consumer Price Index

(IPC), without housing, available on November 30 of the year prior to what

reports the update.

2-For the purposes of this Law, the annual variation of GDP is the one that runs between the

fourth quarter of one year and the third quarter of the following year.

Article 5.

Update of the IAS

1-A The update provided for in the preceding paragraph is made in the following terms:

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a) If the average real GDP growth rate is equal to or greater than 3%, the

update of the IAS corresponds to the increased CPI of 20% of the rate of

real GDP growth;

b) If the average real GDP growth is equal to or greater than 2% and lower than

3%, the upgrade of the IAS corresponds to the increased CPI of 20% of the rate of

real GDP growth, with the minimum threshold of 0.5 percentage points higher

of the value of the IPC;

c) If the average real GDP growth is less than 2%, the update of the

IAS corresponds to the IPC.

2-The update rates arising from the previous figures are rounded up to the

first decimal place.

3-A annual IAS update appears from joint porterie of the members of the Government

responsible for the areas of Finance and Labour and Social Solidarity.

CHAPTER III

Updating of pensions and other social security benefits

Article 6.

Update of pensions

1-The value of pensions allocated by the social security system is updated

annually with effect from the January 1 of each year, taking into account the

indicators provided for in Article 4.

2-Pensions of equal or less than one and a half times the value of the IAS are

updated in accordance with the rule provided for in Article 5 (1).

3-Value pensions between one and a half times and six times the value of the

IAS, are updated in accordance with the following rule:

a) If the average real GDP growth rate is equal to or greater than 3%, the

update corresponds to the increased CPI of 12.5% of the growth rate

real GDP;

b) If the average real GDP growth is equal to or greater than 2% and lower than

3%, the update corresponds to the IPC;

c) If average real GDP growth is less than 2% the update

corresponds to the CPI deducted from 0.5 percentage points.

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4-The pensions of more than six times the value of the IAS, are updated accordingly

with the following rule:

a) If the average real GDP growth rate is equal to or greater than 3%, the

update corresponds to the IPC;

b) If the average real GDP growth is equal to or greater than 2% and lower than

3%, the update corresponds to the CPI deducted from 0.25 percentage points;

c) If average real GDP growth is less than 2% the update

corresponds to the CPI deducted from 0.75 percentage points.

5-The increase in pensions referred to in paragraphs 3 and 4 may not be lower than the value

maximum updating resulting from the rules provided for in paragraphs 2 and 3,

respectively.

6-It is updated the pensions that at the date of the production of effects of the annual increase, the

which refers to paragraph 1, have been started for more than a year.

7-The updating rules provided for in the preceding paragraphs do not apply to the

pensions of the beneficiaries of the Bank Employees ' Welfare Fund

Angola, extinguished by the Decree-Law No. 288/95 of October 30, to the beneficiaries

covered by the special social safety regulations of workers

railway and the staff of the Collective Transport Service of Porto, except in the

which concerns the minimum pension values indexed to the IAS.

8-The survival pensions of the general social security scheme are updated

by application of the respective percentages of calculation to the amounts of the pensions of

disability and old age that serve you as a basis.

9-A annual update of pensions appears from joint office of the members of the

Government responsible for the areas of Finance and Labour and Solidarity

Social.

Article 7.

Fixation of the value of benefits

The minimum value of pensions and other social benefits is indexed to the IAS accordingly

with the coefficients set out in the Annex to this Law which is an integral part of it.

CHAPTER IV

Supplementary, transitional and final provisions

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Article 8.

Replacement of the indexer

1-With the entry into force of this Law the IAS replaces the monthly minimum consideration

guaranteed while referential as referred to in Article 2 (1)

2-The IAS replaces the social pension while referential for fixation, calculation and

updating of social benefits, where applicable.

Article 9.

Reference indicator for the year 2008

Transiently in the year 2008, the real GDP growth, provided for in the a) of the n.

1 of Article 4, corresponds only to the one verified in the year ended in the third quarter

of the year before the one to which the update is reported.

Article 10.

Limit to the updating of pensions

The pensions allocated under the provisions of the Decree-Law No. 329/93, 25 of

September and the point a) of Article 13 (1) of the Decree-Law No. 35/2002 of 19 of

February, the value of which is greater than 12 times the value of the IAS, are not the subject of

update until its value is exceeded by this limit.

Article 11.

Extraordinary increase in pensions

1-To compensate for the postponement of the pension update, in January 2008, the

update arising from the application of the rules laid down in this Law is increased

of an extraordinary increase equivalent to 2/14 of the normal increase in pension.

2-A new indexation of pensions to the IAS, resulting from the extraordinary addition

established in the preceding paragraph, is defined by joint portery of the members of the

Government responsible for the areas of Finance and Labour and Solidarity

Social, published until December 31, 2007.

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Article 12.

Revision of the criteria for updating pensions

1-The criteria that determine the methodology of updating the pensions provided for in the

article 5 should be reviewed every five years, after assessment of impacts

financial in the new way of updating pensions in sustainability

financial system of the social security system.

2-A The first assessment referred to in the preceding paragraph takes place in 2012.

Article 13.

Entry into force

This Law shall come into force on the January 1, 2007.

Seen and approved in Council of Ministers of October 12, 2006

The Prime Minister

The Minister of the Presidency

The Minister of Parliamentary Affairs

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Attachment

Indexation to the IAS of pensions and other social benefits,

referred to in Article 7.

Provision% of Indexing

to the IAS

General Regime-Minimum value of disability pensions and

old age:

No. of calendar years <15 years 57.8%

No. of civil years from 15 a to 20 years 64.5%

No. of civil years from 21 a to 30 years 71.2%

No. of calendar years> 30 years 89.0%

Pensions of the Special Social Security Regime of the

Agricultural Activities

53.4%

Pensions of the Non-Contributive Regime 44.5%

Pensions of the Transient Regime of Agricultural Workers and

of Other Regimes Equitable to Non-Contributive Regimes

44.5%

Value of Social Insertion of Insertion 44.5%