Portugal's pension fund sector remained resilient during the first quarter of 2026 despite a deteriorating outlook across several risk categories, according to the Portuguese Insurance and Pension Funds Supervisory Authority (ASF).

In its latest Pension Funds Sector Risk Dashboard, the ASF said the sector continued to operate against a backdrop of persistent geopolitical tensions, macro-financial vulnerabilities and emerging risks associated with the rapid development of digital technologies and artificial intelligence (AI).

The regulator said the conflicts in the Middle East and Ukraine continued to weigh on economic growth, inflation and European Central Bank monetary policy, while higher interest rates were maintaining pressure on credit risk through increased borrowing and refinancing costs.

Market risk remained at a medium-high level due to the continued possibility of an asset price correction, although liquidity risks were assessed as remaining contained.

The dashboard also showed that the average return on equity of Portuguese pension fund management companies (SGFPs) increased by 1.5 percentage points to 15.5 per cent at the end of 2025.

Meanwhile, the sector's overall solvency ratio fell by 8.9 percentage points but remained at a strong 200.1 per cent.

The ASF also noted that interconnectedness risks remained low as pension fund managers reduced their holdings of banking sector securities.

Risks relating specifically to both defined benefit (DB) and defined contribution (DC) pension plans also remained low, despite negative investment returns recorded in the first quarter of 2026.

The ASF said it expected performance to recover in the following quarter.

In addition, the regulator said environmental, social and governance (ESG) risks remained at a medium-low level, reflecting the long-term nature of climate transition risks.

However, cyber and digitalisation risks continued to be assessed as high; the ASF warned that the outlook had worsened due to the rapid advancement of frontier AI models.

The assessment was based on financial market data as of 14 June 2026, combined with information reported by pension fund management companies as of 31 March 2026.

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