Proposed agenda for pension/welfare reform

As pension welfare reform is out of cold storage it is time to repeat that one cannot reform unless one knows what needs reforming and what does not.

On the eve of the election, the National Association of Pensioners felt it prudent to submit suggestions on reform to the three political parties, to interested organisations and to the media.

Unfortunately, the silence was deafening.

May I suggest that the top of the reform agenda should include at least half a dozen measures to block illegal payments being made and at least a dozen to reduce existing social injustices and harsh anomalies.

Let us start with the matter of illegal payments:

¤ The law says that the first average of 20 years should be on those years immediately preceding the last 10 years. The choice being given sanctions a gap of 11 years without payment of contributions and without loss of pension value.

¤ The acceptance, in 1996, of voluntary contributions by married contributors when the law stipulated 1978 as the date when such contributors had to register their irrevocable decision.

¤ The award of a pension to a self-employed person at 61 years of age when the law lays down 65 years of age, thus losing four years of contributions and paying out unentitled pension for four years.

¤ The conflicting provisions of Section 116 (5) which allows the director 30 years to claim unpaid contributions and limits contributors to a five-year period within which to pay, resulting in total loss of contributions due, without necessarily reducing the amount of pension due.

¤ The failure by the director to utilise his discretionary powers resulting in the loss of millions of liri when deductions of contributions were retained by the employers.

¤ The consideration of the widows and orphans pension as a service pension, thus resulting in non-abatement.

Now for social injustices and anomalies:

¤ Some contributors pay contributions over a period of 45 years, others pay for 30 years. Both get two-thirds of income as pension but as a rule those who pay for 45 years get a lower pension.

¤ A self-occupied person is one who earns more than Lm390 a year from a gainful activity. He pays Lm479.44 as contribution - Lm89.44 more than he earns.

¤ On the other hand, a self-employed person with an income of Lm431 is only bound to pay Lm388.95, retaining a balance of Lm42.04 per annum.

¤ In 1999 the national minimum pension of all pensioners was increased by parliament. Nobody noticed that two categories had their pension entitlement reduced by Lm3.15 a week.

¤ Section 26 lays down that all invalidity pensions are to be reassessed annually and lays down the manner of such reassessment. The department only applies the law when the invalid has two pensions.

¤ Persons earning less than Lm6,618 pay a contribution of 10 per cent while those with a higher income pay a lower percentage.

¤ Pensioners entitled to a service pension have their social security pension calculated on a maximum income of Lm6,750 while those who do not have a service pension have their pension calculated on an income of Lm6,710.

¤ Self-employed/occupied persons are entitled to adjust or claim refunds on contributions but employed persons are not.

¤ When the post of an employed person ceases to exit, the law specifies how the current pay system is to be implemented. The law does not allow similar treatment to a self-occupied person.

¤ In 1996 the pensionable income of self-occupied persons was established on earned income only. The 10-year period, however, was not reduced to three.

¤ A self-employed person with an income of Lm431 may qualify for a pension of Lm36.94 (I.N.M.P.) if born before 1959 and if payment of 1,640 contributions had been made. Had this person been born in 1960, had he made 1,639 contributions before his 51st birthday and one contribution later, his pension would only be Lm2.87 per week.

¤ Two civil servants retire on a salary of Lm10,000; both paid the same contributions but one joined the service in 1978 while the other one in 1979. The former gets two pensions totalling Lm8,400 but the latter gets Lm4,473.