'Status quo is not an option'

A second pillar pension scheme should be introduced only on a voluntary basis while the state pension system, which needs to undergo several adjustments, should guarantee a decent standard of living for future pensioners, the General Workers' Union said yesterday.

The union presented these and other reactions to the pensions' reform White Paper in a 26-page document it forwarded to the Pensions Working Group.

Listing 10 main points that formed the crux of its report, the GWU said it was very important that any reform should be introduced gradually.

First and foremost, it would be useless to reform pensions before the country starts experiencing a GDP growth rate of three to four per cent per annum, because a sustainable pensions system depended on a sound economy.

Another suggestion presented by the GWU was that a reform should take place when the savings ratio per capita increases.

"For Malta to move towards some form of private pension and more 'self-contribution', the savings ratio needs to reach 10 per cent of workers' income," the GWU said. The union pointed out that the savings ratio had gone down from Lm16.85c for every Lm100 in 1994 to Lm1.30c in 2002.

The GWU said the European Union had targeted a labour participation rate of 70 per cent.

"The White Paper did not take account of the fact that if the participation rate increases from 53.7 per cent to 70 per cent, the welfare gap can be minimised further," the document said.

The GWU believes that women should be encouraged to go out to work but that this requires investment in childcare centres and the introduction of flexitime, reduced hours and job sharing.

"The one-year tax break introduced by the government for women who go back to work is commendable and should serve as a model for similar incentives," the union said.

The fourth step was to curb abuse when it came to the income declared by the self-employed, the GWU said.

While most self-employed declared low income early in their working lifetime and thus paid less income tax and National Insurance contributions, their declared income increased in the later years that would be used to calculate their pension.

Another area to be tackled seriously was the Lm12 million the state forked out on 8,000 invalidity pensions.

"Alternative solutions such as job matching should be found," the GWU said. This means that if a person is declared unfit to do a certain job, s/he should be given other tasks.

The GWU opposed raising the retirement age to 65, arguing that jobs like masonry were much more strenuous than, say, clerical work and raising the retirement age was therefore discriminatory.

Retirement age at 62 should therefore be kept, but those who keep on working could get a three per cent increment on their pension for every extra year they work, as well as a different income tax.

The union said the government should set up a fund only for pensions and not finance other activities from NI contributions.

Increments in pensions should reflect increases in salaries and the Lm6,750 pension ceiling should be lifted because it discourages people to save up for their future.

Finally, the basis of pension contribution should be raised to 35 and not to 40 years, while the pension should be worked out on the best three years of the last 10 years of employment and not on the entire contributory period as the White Paper suggested.

GWU deputy general secretary Emanuel Micallef said the union believed that consultation should not stop once the government received recommendations on the White Paper.

"There should be a national consensus on the measures which the government will introduce," Mr Micallef said.

He said that having analysed the situation, the GWU had come to the conclusion that the status quo was no option.

The GWU believed that consensus was possible even if talks on the social pact in the country had failed, GWU general secretary Tony Zarb said at question time.

He said before the government had enacted the Industrial Relations Act a few years ago, the union had not agreed with the suggestions at first, but negotiations had been fruitful.

"Pensions' reform should be based on solidarity and social justice, the two principles that the union considers to be vital," Mr Zarb said.

The document stated that everyone should bear the brunt. However, the system should guarantee an adequate livelihood for those who cannot pay or have a low income.