Employers seek eradication of early retirement loopholes

The Malta Employers' Association has urged the government to eradicate early retirement loopholes whereby persons well below pensionable age were being boarded out for no valid reason.

All efforts should be made to stop workers in the best of health from enjoying early retirement, the association said. Currently an estimated 8,000 persons are known to have been boarded out.

The association made its proposals on pension reform known yesterday during a seminar at the Intercontinental Hotel, during which it also advocated a raising of the retirement age.

Offering retirement to persons below 61 should be discouraged, it said, adding that such cases created resentment by the productive labour force which viewed such cases as reward for an unproductive career.

The MEA called upon the government to create incentives to encourage persons reaching retirement age to remain in employment on a full-time or reduced hour basis.

An option could be introduced whereby employees may work beyond the age of 61 on reduced hours and have the status of "whole timer with reduced hours".

Employees may still opt to retire at the age of 61 but at a reduced pension and provided that they would have contributed over a minimum number of years to the pay-as-you-go system.

The MEA said the government could consider setting up a buffer fund to back the PAYG schemes. This was the case in Ireland which puts aside one per cent of GNP in its buffer fund.

The association said it believed the current cap for pension entitlement of Lm6,700 should be raised to an agreed income, subject to a number of conditions.

Such conditions could stipulate that the scheme would be made mandatory to employees below 30 years of age and that employees under 50 years and earning less than Lm6,700 would still be given the option of participating in this scheme.

The MEA recommended a gradual increase in the retirement age from 61 to 65, reflecting the higher mortality age and which would bring Malta in line with several other European countries.

The association said the retirement age should rise by around one year every two years over a period of 10 years to avoid sudden repercussions on the labour market.

MEA president Paul De Battista said that every effort should be made to ensure that an increase in retirement age would in fact mean later stoppage from work. For example, even though the current retirement age was 61, many workers actually quit work for good by the age of 53, he said.

Another alternative was to introduce a flexible age of retirement with new work conditions towards the end of a person's career to make an extension of the working life easier and more productive.

The female participation rate in the labour force (currently a poor 30 per cent) has to be encouraged to edge closer to the EU average of 60 per cent.

Measures such as access to childcare and fiscal incentives could stimulate the female participation rate, according to the MEA.

Pension funds must be accounted for separately from health and other benefits and there should be a transition from the current system of total reliance on PAYG contributions to one which balances PAYG with funded schemes.

Ultimately, the MEA contended, the eradication of the welfare gap depended on the country's overall productivity, something which was still poor in various sectors.

The social partners should agree on a plan to reduce employment in the public sector over a period of seven years.