2007: a pensions odyssey
By Kurt Sansone
The decision taken last weekend by the social partners and Finance Minister
John Dalli to postpone pension and welfare reform by another six months
is a clear indication that the major stakeholders are not considering
the pensions problem to be an urgent one.
Indeed, the first generation of post war baby boomers will reach pensionable
age in 2007 and this may give us a false sense of security in terms
An analysis of the Maltese population according to age groups shows
that the post-war baby boom took off in 1946 and continued until 1950.
Today these people are aged between 53 and 57. In the 1995 census, when
this same group of individuals were 8 years younger, it was calculated
that they totalled 30,729.
Although today the amount of people would have dropped because of death
related causes the age group still represents the largest segment ever
to reach pensionable age at one go.
The situation does not get any better beyond that age group. From 1951
to 1960 the number of births maintained an all time high. The 1995 census
revealed that the number of people falling within that category was
58,236. Today, these people are aged between 43 and 52.
This means that in a span of between four to 18 years time Malta will
progressively be facing an increasing pensionable population.
Lower birth rate
The anticipated pensions boom will have an impact on the present working
population as well as the upcoming generations. And the picture is not
a rosy one. More people will be reaching pensionable age than people
entering the workforce.
In the 1995 census todays 12 year olds fell within the 0-4 age-bracket.
The total amount of children was calculated at 25,780, which represented
the lowest birth rate in the previous 25 years.
The current birth rates do not augur too well either. Statistics released
by the National Office of Statistics three years ago show that between
1998 and 2000, a total of 13,023 births were registered.
Falling birth rates coupled with an ageing population that will grow
exponentially for the next 20 years will put a strain on public finances.
Fewer people will be employed in productive work and with people living
longer lives the stage is set for a financial fiasco. In very simple
words this means more taxes will be required to finance the pensions
Retiring at 65
Raising the retirement age to 65 for both men and women would help mitigate
the problem. And if government goes ahead with its intention to raise
the retirement age to 65 by 2015 it could actually delay the younger
generations of the post war baby boomers from reaching pensionable age
at one go.
Another way to mitigate the problem is to increase the work force by
encouraging more women to work productively. This would require family-friendly
measures such as flexi-time, child care centres and other incentives
to make it plausible for women to continue working.
The state pension system is financed from current workers taxes
as there is no pension fund in place. In short, the NI contribution
each one of us pays does not finance our future pension, as it should
Within this context private pensions may play an important role to ensure
additional income for retirees but these would need to be regulated
to avoid people losing out on their savings if funds crash because of
Unless the future of pensions is not to be undermined, solutions have
to be implemented sooner then later. People need to have the time to
digest the changes. And given governments cut off date for raising
the pensionable age is merely 12 years down the line taking an early
decision is important.
Preferably, solutions should be implemented with the consensus of all
social partners but it would be a mistake if the search for a consensus
is used as an excuse to delay taking the decisions that matter.