Broad difference in EU,
Maltese pensions strategies
With most Europeans retiring before the statutory retirement age, increasing
employment to ensure pensions are put on a sound financial basis may
not be enough according to a joint report issued by the EU Commission
and Council of Ministers in March this year.
While Europe strives to tackle the pensions phenomenon the Maltese government
has no national strategy in place and, despite the general acceptance
on the need to tackle the issue, government has not presented the social
partners with a position paper.
Apart from arguing for an increase in the statutory retirement age,
which most European countries have already done, the EU report says
member states should try to encourage citizens to continue working until
the retirement age stipulated by law. Raising the effective retirement
age, the average age at which people retire at present, by one year
would help cut the expected pension expenditure rise by 0.6 to one per
cent of GDP in 2050.
The EU report is based on the individual national strategy reports of
the current 15 EU member states and takes into consideration a number
of issues including demographic realities, economic development, employment
issues and the standard of living of pensioners.
As yet Malta has no national strategy in place for pension reform and,
although much of the debate has centred on the increase in the retirement
age, other issues are at stake.
Talking to The Malta Financial and Business Times, Dr Paul Debattista
president of the Malta Employers Association expressed his associations
belief that the retirement age should gradually go up to 65 but the
measure must be accompanied by a development and investment plan.
"We must not focus solely on raising the retirement age because
if it had to be raised by one year from day one it would mean that 3,000
or so people who retire annually to make way for new employees would
still be in employment. We therefore have to ensure the creation of
an increased number of jobs over a span of years. Raising the retirement
age would have to go hand in hand with a development and investment
Debattista reiterated MEAs position in favour of increasing the
retirement age to 65 in a gradual manner.
"The association believes that with longer life expectancy, raising
the retirement age is also of benefit for the fulfilment of the individual
that feels she or he can still contribute. However, it has to be determined
whether the retirement age should be increased for everybody across
the board and how," Debattista said.
He added that other economic issues related to pension reform include
the control of governments fiscal deficit and debt as well as
measures to encourage people to take out private retirement plans. "A
tax rebate for people paying to have a private retirement pension would
encourage the uptake of such schemes," Debattista remarked.
"It is obvious that the problem needs tackling and all concerned
parties must get around the table to discuss reforms to make the pensions
system sustainable in 8 to 10 years time. The MCESD or other fora have
to start discussing the issue."
Debattista said government has not yet presented the constituted bodies
with a position paper. He also said he has not yet met Finance Minister
John Dalli on the issue.
Asked whether the MEA would support an increase in National Insurance
contributions to finance pensions, Debattista did not agree and said
these were already high.
Debattista said: "It would mean increased costs for the manufacturing
industry in particular."
Old age pensions have a two-tier structure. A basic non-contributory
pension subject to a means test and a two-thirds pension based on the
number of Social security contributions and the individuals average
wage before retiring.
However, the State offers a host of other social security benefits ranging
from widow pensions to disability pensions. Despite collecting national
insurance from wage earners and self-employed, the State has no social
security fund in place and the money is pooled in the same basket with
income tax and other revenue sources that go to finance all government