this week: Ageing disgracefully
Calling for action
As we persist in endlessly paying lip service to Maltas looming
pensions dilemma, the problem itself continues to grow day by day as
Maltas population itself ages by the day.
We must emphasise, once again, that the time has come to take concerted
action against the pensions menace through concrete actions.
Real, logical discussions between the government, the unions and business
must commence without further delay lest the ominous conundrum grows
beyond all solutions, save the most painful. Now is the time for action,
while the issue can still be tackled in a fashion so as to reduce the
prospective burden on the state and taxpayer alike.
Of course, at the end of the day the issue is a social one. But it must
be approached with a business-like attitude. After all, what better
way to deal with such an emotive issue than with a business mindset
reinforced by social consideration?
But whatever the solution put forward, the one quality it cannot lack
is a visionary element. Visionary in the sense that todays pensions
decision makers must be able to envisage Maltas socio-economic
structures over the decades to come. This is, of course, no simple feat
but it is one that, through proper dialogue, can nevertheless be achieved.
However the problem is addressed in the end, todays decisions
will undoubtedly affect generations to come.
By now we are all-too-familiar with the problems before us and the many
so-called solutions presented by armchair and real economists alike.
And there is little doubt that the end solution will incorporate private
pension schemes to some extent. The answer could take the form of a
three tiered approach whereby the oldest pensioners would remain
on state pensions, the middle-aged worker would be presented with a
combination of state and private pensions and with the newest segment
of the workforce taking more of the private pension schemes. In the
same vein, a minimum state pension could be proposed, with tax incentives
being offered for private pension scheme holders.
Now with the institution of a special funds act for pensions, paving
the way for occupational private pensions schemes, this area of the
market is expected to begin growing reinforced by the finance
ministers recent strong words on the subject. But these words
have so far failed to be realised into concrete steps.
However, there are the inherent problems here as well and a strong regulatory
framework must be instituted if we are to avoid the debacles the UK
has been riddled with in this respect.
Another matter worthy of due consideration is the fact that if private
pensions schemes are to be created for the Maltese market, the Malta
Stock Exchange must be broadened and deepened through the injection
of more liquidity so as to create a market suitable for these pension
products to diversify in. Otherwise, local pension schemes would inevitably
invest in foreign markets, which would see copious amounts of Maltese
funds leaving the country.
Further developing Maltas Exchange is of the utmost importance
for the future viability of private pension schemes, a market must be
created for these products by the introduction of a wider array of investment
tools in respect of both bond and equity products, in tandem with developing
new pensions legislation and meaningful dialogue.