First reactions to pension reform plans

The pension reform plans unveiled on Wednesday provoked mixed reactions from constituted bodies yesterday though most said they needed more time to evaluate the issues involved.

Prime Minister Lawrence Gonzi said the retirement age will be raised gradually to 65 for those who would have not turned 55 on January 1, 2007. The Lm6,750 capping for the two-thirds pension will be raised to Lm9,000 by 2014. Present pensioners will not be affected by the reform. Dr Gonzi also said that private pension schemes will remain a voluntary option.

However, the government still has to work out how and when a mandatory supplementary pension will be introduced because it does not feel it can impose heavier burdens on workers and employers by increasing the contribution percentage given the country's economic situation.

Alternattiva Demokratika hailed the fact that the retirement age will be raised to 65 and also that the government is undertaking to guarantee a minimum national pension of 60 per cent of average income.

It was worrying, however, that the government had postponed indefinitely the measure to make contributions to private pensions mandatory, Edward Fenech, AD's spokesman for finance, the economy and tourism, said.

Mr Fenech called the proposal a "watered down" reform, expressing concern that the government had "shied away from carrying out a serious reform to bring about a culture change so that those who can afford it will save for their retirement over and above their government pension".

Vince Farrugia, director general of the Chamber of Small and Medium Enterprises, GRTU, said it was a positive thing that the government had committed itself to a target date.

Indecision had been affecting pensioners' purchasing power as these were uncertain about the extent the reform was going to affect them, he said.

"We still have to evaluate the proposals properly but at least we have a basic framework and we can look ahead," Mr Farrugia said.

It was a good thing too that the quantum of the second pillar pension was open for discussion, he said.

In its proposals, the GRTU had said the pension should be augmented according to the pace at which salaries increased and not just by a fraction of the cost-of-living-adjustment as this was widening the shortfall between workers' and pensioners' quality of life.

For the director general of the Malta Employers' Association, Joseph Farrugia, raising the retirement age to 65 is a good idea.

"It is positive that the government is reforming the system without too many shocks. Thinking about the problem now and introducing a reform over a number of years is in everybody's interest," Mr Farrugia said.

The government should tread carefully on the second pillar because increasing the national insurance contribution would place added burdens on employers and reduce workers' take home pay, he said.

"The government should factor in the increasing trend of people investing in property. Assets should also be considered in this reform, especially because of the exponential returns from property," Mr Farrugia said.

Gejtu Vella, general secretary of the Union Haddiema Maghqudin, said the union would issue its official position in the coming days. He did say, however, that once the government had laid its cards on the table, it was important to start a discussion on important details that still had to be explained.

"An important feature introduced by the government is the promise to take stock of the system every five years. One main problem had been that the Lm6,750 capping established in 1981 has not been touched for 25 years," Mr Vella said.

The General Workers' Union said the government should present its decisions to the social partners before moving the Bill in Parliament.

"The Prime Minister had promised to discuss the reform at the Malta Council for Economic and Social Development. The government should keep its promise if it really respects the social partners," the GWU said.

Contacted for his initial reaction to the plans, the National Association of Pensioners' president, Albert Tabone, said it was still early to give an objective reaction, adding that the association would soon be making its position public.