Pensions’ future not altogether bleak, minister says

Finance minister Edward Scicluna has encouraged stakeholders to adopt simple and transparent measures that can ensure the sustainability of the public pension system.

“The future is not altogether bleak,” Scicluna said, adding that employment, fertility and immigration rates had all presented challenges for the future, and that unions were in a much better position to answer the needs of the workers in society.

“There are a number of threats to the system,” Scicluna said, stressing that Malta was working hard to avoid the situations faced by countries like Greece and Spain, where people did not get what they were promised and where unsustainable schemes had ultimately led to the unraveling of pension systems.

A task force will be looking into encouraging people to save from a young age, Scicluna announced.

He said that incentives to encourage people to join the workforce like free childcare and tapering of benefits, had ultimately brought down national debt levels and defuse the time-bomb presented by pensions.  “At this point the idea of increasing the age of retirement would be too shocking, but the government is offering incentives to those who still wish to be in the workforce out of their own free-will,” he said, adding that any introduction of a second pillar pension would come with safeguards to ensure no increases in national insurance contributions.

The surge in life expectancy, with males born in 2015 expected to live until age 79 and females until age 83.2, exceeding the EU average, coupled with the decrease in birth rates are expected to have a major impact on expensive public pensions.

Malta is set to be among one of the quickest ageing countries in Europe, precisely due to the growing life expectancy and low fertility rates in recent years.

Over the next 15 years or so, the elderly segment, especially the very old, is set to rise dramatically. In fact, according to our population projections for 2030, today’s 18.9 per cent aged 65 will rise to 24.4 per cent in 2030; the elderly reaching age 80 and over will be 12.9 per cent of our working age population when compared to our present 6.1 per cent.

Shadow social policy minister Paula Mifsud Bonnici said it was true that the measures on the state pension which had been recommended in 2004 had stabilised the public pension funding gap around breakeven until 2040, but she questioned whether this was enough.

“2040 is only 24 years away and people in their early 40s today will be pensioners then.  Unless Government provides other major and structural reforms, the deficit in proportion of the GDP will continue to increase.”

She said that although the Opposition is in favour of a third pillar scheme, she argued that this leaves major segments within society exposed. “While fiscal incentives were offered to raise interest in the scheme, the incentives offered lack innovative ideas and more importantly are considered insignificant by many to invest in, leaving take-up rates with much more to be desired for

She said the PN was pleasantly when Finance Minister Edward Scicluna made an announcement during a special joint session of the Malta Council for Economic and Social Development and the Malta EU Action Steering Committee that plans for a voluntary second-pillar pension scheme were being drawn up by the government with plans also to appoint a task force to suggest fiscal incentives for such a purpose.