Pensioners reject key reform proposals

The National Association of Pensioners has hit out at key recommendations in the pensions reform White Paper and wondered who exactly was assuming ownership of the proposals.

NAP president Albert Tabone said yesterday the association did not favour the proposed mandatory second pillar pension scheme. This was because it would mean that an extra five per cent would be deducted from a worker's take home pay and this would negatively affect competitiveness and further reduce people's "spare" cash.

"A substantial proportion of this money would be invested abroad meaning that this money would be withdrawn from the economy," Mr Tabone said.

Considering that people are saving much less than they used to and that employers would probably be reluctant to put up more money for employees' retirement at this point in time, a second pillar pension should be abandoned, he said.

Instead, the government should encourage more people to take out insurances through tax incentives while the state would continue to provide pensions that were well above the poverty line.

The association is proposing that when the economy picks up, say in 2007 or 2008, the social insurance contribution is increased by one per cent in the case of employees while employers would also have their contribution increased by a percentage point. The contribution by the self-employed would increase by two per cent of their income.

Mr Tabone said the NAP agrees that the retirement age be gradually raised to 65 years. However, people should be entitled to a full pension before 65 provided they are not below 61 and have made a minimum of 2,080 contributions.

However, the 40-year contribution period as proposed in the White Paper is "unacceptable" to the association. Mr Tabone said the accumulation period should be increased gradually to spare those people who have worked for many years already.

The 40-year baseline should apply for those aged 30 and below while the accumulation period for workers aged 45 and over should be of 30 years. With regard to the maximum pensionable income of Lm6,750, established in 1981, Mr Tabone said this should at least reflect inflation between then and now. He said the maximum pensionable income should be revised to Lm8,000 immediately, to reflect the cost of living adjustment increases since 1994 and to reflect inflation since 1981.

"The document is silent on issues which adversely affect thousands of current and future pensioners," Mr Tabone said. One such issue is the linkage between pensions and salaries. Workers with a salary below Lm6,750 would no longer have their pensions revised to take account of changes in current pay, he said.

The association said the White Paper fell short of tackling work-related benefits such as sickness, injury and unemployment, making no reference to widows' pensions either. It also failed to tackle the incongruity between contributory pensions and occupational pensions for which one does not contribute but which are paid out of public funds.

The document omitted to say how such benefits are to be financed and also how the government plans to credit contributions of someone receiving a social benefit, Mr Tabone said.

The NAP criticised the fact that the pensions of parliamentarians, which were not tackled in the White Paper, are revised whenever the salary is changed and are not capped like everyone else's. "If we are to get anywhere, politicians should lead by example," Mr Tabone said. Yet, the harsher statements levelled at politicians by the NAP have to do with the government's "reluctance to take ownership of the White Paper".

In the covering letter accompanying proposals, the association pointed out that Family and Social Solidarity Minister Dolores Cristina had said in January that raising the contribution from 10 to 15 per cent "should and must be avoided". Days later, Education Minister Louis Galea said the White Paper reflected neither the government's nor the Nationalist Party's position.

"We do not know whose position this is so we don't know whom we are speaking to," Mr Tabone said, adding that a White Paper is usually a government proposal which is up for discussion.

"There needs to be some very clear talking by those in power," he said.

When the association contacted the Office of the Prime Minister last week, he said officials refused to accept the association's feedback saying reactions should be sent to David Spiteri Gingell (the Working Group chairman) at the Malta Information Technology and Training Services in Blata l-Bajda, even though the White Paper itself said reactions should be submitted to the OPM.

Mr Tabone did not spare Labour politicians either: "The opposition is doing a great disservice to the country by saying that reform is not needed."