The parametric reforms introduced since 2002 will have the affect of reducing the growth of first pillar pensions. To compensate for this the government is widening the scope of the State Fund Management Institution (IGFCSS), which manages the Portuguese reserve fund, the Social Security Financial Stabilisation Fund (FEFSS), to allow it to manage a new first pillar DC element known as the Public Capitalisation System from January.

"People will be able to contribute an additional percentage of their salary so they can have an additional complementary pension on retirement," says IGFCSS vice-president Henrique Cruz. The accounts will be managed separately from the IGFCSS fund but will have the same investment profile, Cruz adds.

"People can put money on their account, it will be managed collectively and be invested with a conservative profile. The idea is that it should get a higher net return than existing personal pension plans, the PPRs, because of the scale of IGFC's joint management with the FEFSS. And at retirement we will buy a client an annuity plan through a collective scheme."

Will it be mandatory? "No, it will be voluntary, because it is an alternative to working longer," says Cruz.