Immigrants and the sustainability of Social Security

In short

The question. How much do immigrants pay into Portuguese Social Security and how much do they receive, and what would change without that balance? The study uses data from the Migration Observatory, the Public Finance Council and the Budget Directorate-General, from 2020 to 2024.

What the study shows

• Balance (section II). The difference between contributions and benefits received went from +€802.3 million in 2020 to +€1,820 million in 2023. Foreigners were 14.4% of contributors in 2023.
• Surplus (section IV). That balance equals 33.2% of the €5,482 million surplus Social Security had in 2023.
• Pensions (section V). Against spending of €17,375 million on old-age pensions in 2024, the 2023 balance corresponds to 10.5%.

In practice. To sort out your NISS, the guide to the NISS and Social Security explains who applies for it and how to activate Segurança Social Direta; the guide to working in Portugal and the IRS guide complete the picture, and My path shows where to begin.

Limits. The balance measures only contributions minus social benefits received. The 2023 figures are approximate, and the pensions calculation compares the 2023 balance with 2024 spending.

I. Introduction: The Demographic Paradigm and the Architecture of Portuguese Social Security

Any analysis of the sustainability of Portugal’s Social Security system is inseparable from the country’s deep demographic challenge. The Portuguese system rests overwhelmingly on a pay-as-you-go model. This financing model is an intergenerational pact: the social contributions paid by active workers at any given moment directly fund the social benefits, primarily old-age, disability and survivors’ pensions, of current beneficiaries.

The viability of this pact depends critically on a healthy demographic ratio between the number of contributors (the working population) and the number of beneficiaries (the inactive population). In a context like Portugal’s, marked by pronounced population ageing, low birth rates and rising life expectancy, the national contribution base shrinks while pension spending grows.

In this context, immigration stops being a secondary social variable and becomes a central economic and demographic factor for the system’s balance and sustainability. The inflow of migrant workers, typically younger and of working age, has the potential to broaden the contribution base and ease structural imbalances.

This report sets out to quantify, strictly on the basis of official data from the Migration Observatory (OM), the Public Finance Council (CFP), the Directorate-General for the Budget (DGO) and the Court of Auditors, the net contribution of the immigrant population to Social Security between 2020 and 2024. The aim is to analyse the financial impact of this population factually, dismantle myths and establish, through a counterfactual analysis, what the system’s balance would be without this contribution and to what extent these workers fund the pensions of Portuguese beneficiaries.

II. Quantifying the Contribution Position of Immigrants (2020–2023)

Analysis of the official data for the last four years shows that the immigrant population is not only a net contributor to Social Security, but that its positive impact has grown exponentially. The data come mainly from the Migration Observatory’s (OM) annual “Indicators of Immigrant Integration” reports.

The year-by-year evolution of the financial balance (the difference between total contributions paid by immigrants and total social benefits they received) shows this trend unequivocally:

• 2020: Immigrants’ financial balance with Social Security (contributions minus benefits) was positive at +€802.3 million.

• 2021: The number of foreign contributors reached 475,892 people, 10.1% of all contributors to the system.

  • (A) Contributions: a then-record €1,293.2 million.
  • (B) Social benefits received: €325.2 million (inferred from the contribution and balance data).
  • (A-B) Net balance: the positive balance reached +€968 million.

• 2022: The share of foreign contributors rose significantly, to 13.5% of all contributors to the system.

  • (A) Contributions: a new all-time high of €1,861 million.
  • (B) Social benefits received: immigrants received only €257 million in benefits.
  • (A-B) Net balance: the balance jumped to +€1,604.2 million. As reported in the press, immigrants paid in seven times more than they received from the system.

• 2023: The growth trend consolidated. Foreign citizens came to represent 14.4% of all contributors to the Social Security system.

  • (A) Contributions: the figure approached €2,200 million.
  • (B) Social benefits received: benefits received totalled about €380 million.
  • (A-B) Net balance: the net positive balance hit a new record of +€1,820 million.

The trajectory of the net balance, from +€802.3M in 2020 to +€1,820M in 2023, shows growth of more than 127% in just three years. This underlines that the immigrant population is not merely a static net contributor, but a growing and accelerating source of funding for the system.

Table 1: Net Contribution Balance of the Immigrant Population (2020–2023)

(Figures in millions of euros, €M)

Year	(A) Total Contributions (€M)	(B) Social Benefits Received (€M)	(A-B) Net Balance (€M)	Annual Growth of Net Balance (%)
2020	n/a	n/a	+802.3	-
2021	1,293.2	325.2	+968.0	+20.5%
2022	1,861.0	257.0	+1,604.2	+65.7%
2023	approx. 2,200.0	approx. 380.0	+1,820.0	+13.5%

Sources: Data compiled from Migration Observatory (OM) reports, cited in the references.

III. The Structural Profile of the Immigrant Contributor: The Demographic Engine of the Positive Balance

The consistently positive and growing financial balance detailed in the previous section is no accident. It is the direct, structural result of the demographic profile of the immigrant population living in Portugal.

Age Structure and the “Demographic Subsidy”

The main reason for the high net balance lies in the age structure of the foreign population. While the Portuguese population ages, the immigrant population is structurally young:

1. Working age: Official reports indicate that 80.5% of foreign citizens living in Portugal are of “potentially working age”.
2. Age concentration: The predominant age group is 25–44, totalling 532,214 people.
3. Small elderly population: Only 7.9% of the resident foreign population is over 65.

This demographic profile creates a “demographic subsidy” for the Social Security system. A pay-as-you-go system spends its largest share on costly, long-term benefits, notably old-age pensions. As the 2024 budget execution data show, this item alone (old-age pensions) amounted to €17,375 million.

Immigrant workers (only 7.9% of whom are over 65) actively pay into the system that funds these pensions, but, as a group, do not yet draw on them significantly.

Activity Rates and the Nature of Benefits

Beyond age, the data show that immigrants are more likely to work than the national average. In 2022, the activity rate of foreigners was 76.9%, 18.7 percentage points above the rate recorded for Portuguese nationals.

This combination of factors (a young age structure and a high activity rate) means that immigrants are maximum contributors and minimum beneficiaries (in cost terms). The benefits they receive (the €380M in 2023, for example) are concentrated in much cheaper, short-term items such as unemployment benefit, child benefit or sickness benefit.

This phenomenon is so robust that it persists even though immigrants are often concentrated in low-wage sectors (agriculture, hospitality, construction). Even with average wages that are sometimes lower, their net fiscal impact is massive because their use of the system’s most expensive benefits (old-age pensions) is structurally close to zero. The positive balance is therefore a pure demographic effect.

IV. Impact Analysis: The Counterfactual Scenario Without These Contributions

Working out “what the deficit would be if these immigrant contributions did not exist” requires a counterfactual analysis.

The correct methodology is not to subtract gross contributions (e.g. €2,200M) from the overall balance, but to subtract the net balance (e.g. €1,820M). This is because, if these immigrants were absent, the system would lose their contributions (revenue) but would also stop paying their benefits (expenditure).

Step 1: The Overall Social Security Balance

First, we need to establish Social Security’s overall budget balance (surplus), which has been presented as a success of financial management. According to reports from the Parliamentary Budget Office (UTAO):

• Social Security’s overall balance in 2022 was a surplus of +€4,101 million.
• Social Security’s overall balance in 2023 was a surplus of +€5,482 million.

Step 2: Calculating the Counterfactual Balance

Applying the correct methodology, we subtract immigrants’ net balance (identified in Section II) from the system’s overall balance:

• Counterfactual scenario 2022:

  • Reported overall balance: +€4,101M
  • Removing the immigrant net balance: -€1,604.2M
  • Counterfactual balance (without immigrants): +€2,496.8M

• Counterfactual scenario 2023:

  • Reported overall balance: +€5,482M
  • Removing the immigrant net balance: -€1,820M
  • Counterfactual balance (without immigrants): +€3,662M

Step 3: Interpreting the Impact

The system as a whole would not technically have gone into deficit in 2022 or 2023. However, its surplus, the savings vital for future sustainability and for the Social Security Financial Stabilisation Fund (FEFSS), would have been drastically reduced.

The percentage analysis shows the scale of the impact:

• In 2022, immigrants’ net balance accounted for 39.1% (1,604.2 / 4,101) of Social Security’s total surplus.
• In 2023, immigrants’ net balance accounted for 33.2% (1,820 / 5,482) of the total surplus.

The conclusion is that the system’s “financial health” and surplus are structurally dependent on immigration. About a third of Social Security’s annual surplus comes not from the native population but from the net positive balance of foreign workers.

Their absence would not create an immediate deficit, but rather a “sustainability deficit”, as it would wipe out a substantial share of the savings needed to guarantee future pensions and would require, as an alternative, higher taxes on nationals.

Table 2: Counterfactual Analysis of the Social Security Surplus (2022–2023)

(Figures in millions of euros, €M)

Year	(A) Reported Overall SS Balance (€M)	(B) Immigrant Net Balance (€M)	(A-B) Counterfactual Balance (Without Immigrant Net Contribution) (€M)	Impact: Immigrant Balance as % of Overall Surplus
2022	+4,101.0	+1,604.2	+2,496.8	39.1%
2023	+5,482.0	+1,820.0	+3,662.0	33.2%

Sources: Analyst’s calculation based on UTAO and OM data.

V. Validation: Funding the Pensions of Portuguese Nationals

The claim that “many pensions are paid to Portuguese nationals thanks to immigrants’ contributions” is factually correct and can be quantified.

The validation rests on the fundamental mechanics of a pay-as-you-go system:

1. The system has no individual funded accounts. Contributions paid (including immigrants’ approx. €2,200M in 2023) go into a common pool.
2. This common pool is immediately used to pay current expenditure.
3. The system’s largest current expense is pensions, paid overwhelmingly to Portuguese nationals given the population’s age profile.

To quantify the validation, we compare the surplus generated by immigrants with total pension spending.

Cost of pensions (2024 execution data): According to the Public Finance Council (CFP) report on Social Security budget execution in 2024:

• Total pension spending (old-age, survivors’, disability): €23,972M
• Spending on old-age pensions specifically: €17,375M

The Validation

The net balance (surplus) generated by immigrants in 2023 was +€1,820 million.

This €1,820M is free revenue the system collected over and above what it spent on this population. By the mechanics of the system, this surplus was channelled into covering the system’s other expenses, primarily the €17,375M in old-age pensions.

Validation calculation: (Immigrant net balance 2023) / (Total old-age pension spending 2024) = €1,820M / €17,375M = 10.5%

The claim is therefore validated and quantified. The net balance generated by (young, active) immigrant workers funded the equivalent of 10.5% of the Social Security system’s entire spending on old-age pensions. Without this net contribution, the system would have needed an extra €1,820M in 2023 to fully cover its pension spending.

VI. Conclusions: The Immigrant Contribution as a Structural Solvency Factor

A rigorous analysis of official data from Social Security, the Public Finance Council and the Migration Observatory for 2020–2024 supports the following conclusions:

1. Net contributors: Immigrants in Portugal are substantial net contributors to Social Security. Their positive balance (contributions minus benefits) more than doubled in three years, growing from +€802M in 2020 to +€1,820M in 2023.

2. A growing contribution base: The immigrant population is a growing and vital share of the contribution base, already 14.4% of all contributors to the system in 2023.

3. Demographic engine: This positive balance is structural, not random. It is driven by a demographic profile of young workers (80.5% of working age) with higher activity rates than nationals (+18.7 pp), who pay into the old-age pension pillar (the most expensive) without yet drawing on it.

Direct Answers to the Questions Posed

The data allow the questions raised to be answered objectively:

1. Share of contributors: In 2023, immigrants made up 14.4% of all Social Security contributors.

2. Impact of their contributions: The impact is a net balance (surplus) of +€1,820 million in 2023. This figure is formally described as “favourable in offsetting the national public accounts” and “an important dimension of strengthening and sustaining Social Security”.

3. The counterfactual deficit: Without immigrants’ net contribution, the system would not have gone into deficit in 2023, but its surplus (its savings) would have been 33.2% smaller. Social Security’s overall balance would have fallen from +€5,482M to +€3,662M.

4. Validating the funding of pensions: The claim is validated. A pay-as-you-go system uses all its revenue to pay all its expenditure. The €1,820M net surplus generated by immigrants was used to fund current spending, financing the equivalent of 10.5% of the system’s entire spending on old-age pensions.

The official data for the last four years show unambiguously that the immigrant population is not a “burden” on Portuguese Social Security. On the contrary, it is an essential demographic and financial pillar that ensures the short-term solvency of the pay-as-you-go system and directly funds a substantial share of the pensions paid to nationals.

References

Sources are listed under their original titles, most of them in Portuguese.

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