The pension time bomb is ticking louder as the first recruits from the Maltese post World War II generation have started to join the ranks of pensioners.
As the generation born in 1944 celebrated its 61st birthday last year, the pension bill jumped up by Lm6.7 million from Lm51.7 million in 2004 to Lm 58.2 million in 2005, an increase of 13 per cent.
According to the National Office of Statistics this increase was brought about by a net increase in the number of beneficiaries.
A spokesperson for the ministry for the family and social solidarity told Business Today that this sharp increase is owed to the fact that 2005 is the first year which saw baby boomers reaching pensionable age. “All projections so far, whether those presented by Government, the World Bank or others, see a rise in expenditure. This is also due to demographic changes and shifts in trends,” the spokesperson told Business Today. “Costs will nowhere be near as sharp as the ones we are currently beginning to undergo,” the spokesperson said.
The increase in the pension bill registered in 2005 was the highest one in the last five years.
Since 2000 the pension bill has jumped by Lm 19,790,146 – an increase of 51.3 per cent.
Yet the expenditure on pensions is set to increase in the next few years, reaching a peak between 2007 and 2009 when those belonging to the baby boom generation are set to retire.
The 1995 census revealed that a significant part of the population, 30,729 were born between 1946 and 1950.
Although the bill on pensions is set to rise in the short-term, government’s proposals exempt those aged 55 and over.
“The phenomenon of baby boomers has been taken into consideration and will in turn affect the eventual pension reform,” the ministry spokesperson said.
She also pointed out that the pension reform presented so far is an outline which permits further discussion to ensue. Minister Louis Galea and Minister Dolores Cristina have begun to hold meetings with various constituted bodies on these reforms.
“As announced by the Prime Minister at the original press conference, more refined details will emerge as the discussions intensify, up until the proposed amendments to the Social Security Act are announced towards June.”
The drafting of the amendments to the Social Security Act is already in the pipeline. Apart from the effect of baby boomers, the government is concerned by the decrease in workers contributing for these pensions.
“It is not only expenditure that will rise, but also the number of suppliers per beneficiary. The current ratio stands at 4:1, that is for every pensioner there are four active, working contributors. This ratio is expected to shift gradually over the years and decrease to 2:1”
The Labour Opposition is also committed to present its proposals by next June, opting to keep silent on any of the issues linked to pension reform.
Asked whether the MLP will seek to address the rise in expenditure due to the emergence of baby boomers in the next few years, spokesperson Karl Chircop said that the party was studying demographic patterns.
But the MLP’s spokesperson was evasive about his party’s pension plan.
Asked whether the party is considering raising the retirement age and whether his party envisages a greater role for private pensions, Chircop simply said that the party is considering all options.
Chircop simply said that unlike the government’s proposals the MLP’s proposals will be socially fair and not just aimed at protecting the higher strata of society.
“The government has taken ten years to come up with a document. We only need a few months. When we present our plan you will all be satisfied,” Chircop told Business Today.