That’s a whole new definition of ‘Pensions Time Bomb’…

Right: I suppose I shall have to preface this article with a gentle reminder – to myself, as much as to my readers – that mathematics has never really been my strong point, at the end of the day.

So when I read an online interview with Finance Minister Clyde Caruana yesterday morning – specifically about next Monday’s budget – I more or less expected that some of the figures he would bandy about, would strike me as being somewhat slightly… well, WRONG, to be perfectly blunt.

And yes, yes: I know it’s a little presumptuous of me, to question the calculations of such a seasoned ‘economist-mathematician’ (all the more so, given that everyone else - including the interviewer - seems to have simply accepted all Caruana’s figures, without so much as batting an eyelid…)

But then again: it’s a bit like having (or not having, as the case may be) an aptitude for, say, ‘music’. Everybody knows that a certain amount of ‘musical talent’ is an essential pre-requisite, for anyone aspiring to be a musician. But let’s face it: you don’t really need much of an ear at all, to instantly realise when someone else is singing ‘off-key’....

Well, it’s the same with numbers, up to a certain extent. I may lack the skill to solve complex mathematical problems, myself… but I can still immediately notice, when someone else’s answer happens to contradict certain visible realities, on the ground.

Like, for instance, the precise number of pensioners living in Malta, right now. I stand to be corrected, of course: but as far as I remember, the latest Census revealed that the number of people in the ‘65+ years-old’ category, amounted to 19.3% of the entire population (in turn, estimated at roughly ‘550,000’), in 2022… giving us a total of ‘roughly 106,000’ pensioners in Malta, last year.

Granted, this does not include people who receive State pensions for reasons other than ‘retirement’; and even if it did, the percentage itself will no doubt have increased a little, since last year… as it has consistently increased (by around 0.2-0.3% per annum), for the past few decades, without fail.

But still: if Clyde Caruana’s computations are indeed correct… it means that the number of pensioners living in Malta must have somehow shot up to around ‘184,911’ – from ‘106,000’ last year, if you’ll remember – in the space of just 12 months!

Or does it? Because this is where I always used to screw up, in all those Maths exams at school (i.e., I always used to assume that everyone else, except me, got all the answers ‘wrong’; until, of course, I finally received my exam results…). So bear with me, while I go over the sums a little in my head.

As I recall, Clyde Caruana told Times editor Herman Grech yesterday that: “COLA increases […] will add around €100m to the cost of pensions.”

Now: the precise wording is important, there. The Finance Minister uses ‘Addition’ – one of the four major operations of Arithmetic, alongside ‘Subtraction’, ‘Multiplication’, and ‘Division’ – to explain the effects of this year’s Cost-Of-Living Adjustments, on his government’s recurring welfare expenditure.

Effectively, this means that the figure of €100 million represents the amount by which the ‘cost of pensions’ has actually increased, as a result of the COLA refunds… and NOT the total amount that the expenditure will reach, after those refunds are factored in.

It’s complicated, I know – mathematics always is – but in purely arithmetical terms (and always according to Caruana’s calculations), this works out as:

‘100 million = cost of pensions MINUS (not plus) the COLA increases’…

Hang on, wait. I’m making this way more complicated than it actually needs to be. So let me rephrase that, in the simplest way I possibly can:

What it means, in a nutshell, is that this year’s COLA increases for pensioners amount to exactly ‘100 million euros’… in and of themselves.

And, well, this is the part my brain has been trying to grapple with, ever since. For unless I am much mistaken: in last year’s Budget, Clyde Caruana had told us that while the Cost of Living Adjustment for 2023 worked out at €9.60 a week… the COLA increase for pensioners would be capped at only €2.60, per pensioner.

And while the €9.60 is to be paid out by Maltese EMPLOYERS, not the Maltese government (that’s an important detail, by the way: so keep it in mind for a future article) – with the pension increases, it works the other way round.

What our Finance Minister is effectively telling us, then, is that this additional expense of ‘€2.60 per week, per Maltese pensioner’, amounts to a staggering ‘100 million euros’: in and of itself.

Which also implies that – one sec, while I open up my calculator app - ‘2.60 x 4 x 52’ should give us the total government expenditure, per annum, on each individual Maltese pensioner. (The answer, by the way, is ‘€540.80’.)

So for the Maltese government to end up spending E100 million, just on COLA increases for ALL Malta’s pensioners… well, work it out for yourselves. ‘100 million divided by 540.80 equals… 184,911’. And that gives us the precise number of people who will be claiming a State pension in Malta, by next year alone.

Hmmm. Sorry to sound so sceptical, but… is that even physically possible, to begin with? Or is there something I’m not quite seeing, in all this?

Reason I ask is that: for the past six or seven years, the rate at which Malta’s population has been physically ageing, has never once exceeded the 1% mark. Between 2020 and 2021, for instance, the ‘65+ years old’ age-bracket swelled by only  0.6%: from 18.87, to 19.13%. And it was broadly the same (and often, a lot less) in all preceding years.

Are we to understand, then, that the same national ageing rate has suddenly shot up – just like that, from one moment to the next – from an annual average of ‘0.5%’… to well over SEVENTY-FIVE PER CENT [75%], in a single year? in other words: from 106,000 in 2022, to 184,911 today?)

Now: just like I’ve already admitted to having always been rather crap at Mathematics, when all is said and done… well, I was never much good at being a ‘demographic statistician’, either. So who knows? Maybe it IS possible, after all, for such a giant chunk of an entire country’s population, to suddenly reach retirement age – all at the same time – in course of a single year.

Or maybe there’s some kind of new ‘virus’ going round, that’s causing people to inexplicably age by 20 or 30 years, in the space of just a few months. (Hey, you can never really tell what they’re cooking up in all those secret underground laboratories in China… can you, now?)

Of course, there is another possible explanation (though it has more to do with ‘Linguistics’ than ‘Mathematics’, this time round).

Let’s face it, folks… Clyde Caruana is not exactly the first Maltese government minister – in any administration of government - to dangle the fabled ‘Mitt Miljun’ carrot, before a suitably mesmerised Maltese electorate.

And not without good reason, either. ‘€100 million’ does, after all, have a certain ‘ring’ to it, if you know what I mean. It certainly sounds a lot more ‘exciting’, to the ear, than, say… the entirely more ‘modest - but ‘believable’ (and therefore, ‘boring’) - sum of ‘€58.3 million’…

… which, incidentally, is what this year’s COLA increases would REALLY have added to the ’cost of pensions’… if Malta’s ageing rate remained more or less unchanged, since last year.

Either way, however: one thing’s for sure. Just with that one statement, alone… Clyde Caruana has sure given us a whole new dimension of meaning, to the term: ‘Pensions Time-Bomb’…