The Malta Employers' Association is recommending a rise in the retirement age to 65 for both men and women in order to make the pension system more sustainable and to reduce the welfare gap.

The proposal, contained in the association's recommendations for the 2004 budget, is that the retirement age be raised gradually, by one year every two years over a period of 10 years, to avoid sudden repercussions on the labour market.

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

It said the pension funds should be accounted for separately from health and other benefits.

The current cap for pension entitlement of Lm6,700 should be raised to an agreed income, say, Lm12,000, subject to various conditions, the MEA proposed.

The MEA is also recommending that no measures be introduced that would increase the burden on employers.

"The overall strategy should not be how to raise revenue to reduce the deficit through additional taxation but to focus on how to remain competitive in order to generate productive economic activity," the MEA said, stressing the need to control wage inflation to safeguard jobs.

"It is clear that the system of boarding out is being abused and individuals are finding easy access to early retirement... Early retirement is also no solution to redundancies."

The MEA added that another area in which money could be saved by curbing abuse was claims for unemployment benefits.

"The government should make participation in retraining schemes mandatory. It is a fact than many unemployed refuse to participate in such schemes because they have informal employment."

The MEA repeated its proposal for a reduction of public holidays and called for a re-evaluation of whether the students' stipend system was really affordable. Any savings here, it added, should be channelled into funds for research projects and the purchase of equipment at university and the college of arts, science and technology.

The association said interest rates in Malta should reflect the global climate and be reduced further to stimulate economic activity as part of an expansionary economic policy, while income tax rates should be reduced to stimulate demand.

It called on the government to tackle the situation in the ports and to closely monitor its spending to curb inefficiencies and abuses.

"There is still room to improve tax revenue by curbing tax evasion. This will dent the public deficit but will not be sufficient to eliminate it. If new taxes are introduced there is the danger of incentivising tax evasion," the MEA said.

Apart from calling for the reduction of manpower in public and parastatal corporations, the MEA favours an increase in female participation from the current 30 per cent to higher levels in line with other European countries.

Incentives, such as the setting up of child care centres, should be offered to increase female participation.

The MEA said that in view of the changing demographics and the mounting pressures on health expenditure, tax breaks for private pension schemes and health insurance should be introduced.

There should be a clear strategy to reduce dependency on energy imports by encouraging use of energy saving devices such as solar water heaters.

"The government, through the Malta Council for Economic and Social Development, should establish a social pact to set a clear strategy for Malta for the coming years. The social pact could cover a period of three to four years and would include, among other points, an incomes policy agreement," the association proposed.

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