This is according the OECD, which said the country’s “rapidly ageing population” – a result of low fertility and rising life expectancy – is putting pressure on pension finances.

“Portugal has profoundly reformed its pension system over the past decades and made it more financially sustainable,” said Stefano Scarpetta, OECD director for employment, labour and social affairs, launching the report in Lisbon on Wednesday.  

“Now the focus should be on strengthening the incentives and ability of older people to stay longer in the labour market, simplifying the old-age safety-net and pension system, and improving its design to better cope with longer lives.”

Reforms so far have included aligning the retirement age between men and women, linking the retirement age to life expectancy, and gradually integrating the scheme for civil servants with the general pension scheme.

But the OECD said the system “can still be improved”.

Income inequality among older people is high in Portugal, even with safety-net provisions that help reduce the risk of old-age poverty, which is below the OECD average.

But access to these provisions has proved a challenge. The administrative complexity generates costs and contributes to long waiting times, and some people may be discouraged to apply for benefits, the OECD said.

It also said there should be more financial sustainability of the pension system and people should be encouraged to work longer.

The Portuguese population is shrinking and is projected to fall below 9 million by 2050 from a peak 10.7 million in 2009, due to less young people working in the country.

The decline in working-age population is the steepest decline in the OECD, with the number of 20- to 64-year olds expected to fall by 30% by 2050, compared with an average 5% among OECD countries.