Minister calls for early implementation of second pillar pensions

The Minister for Family and Social Solidarity, Dolores Cristina, said yesterday that in her personal opinion, second pillar pensions should be introduced "sooner rather than later", adding that the government's position was that the second pillar introduction was a matter of "when and not if".

"No one has excluded second pillar pensions," she said.

Speaking during a business breakfast at the Radisson SAS, in St Julians, organised by Business Today and sponsored by Bank of Valletta, she said that a draft of the legislation on the first pillar - which includes the raising of the retirement age to 65 - would soon be presented to the Cabinet but warned that there were many other stages of tweaking before it went to Parliament and eventually came into force. She said that this would be done before the end of the year.

However, she could give no timeframe on second pillar or third pillar pensions, which would have an impact on the government's revenue. Third pillar pensions would be voluntary but would still have tax implications.

Prime Minister Lawrence Gonzi had said last March when launching the skeleton of the first pillar reforms that tax reform proposals would need to be completed before second and third pillar pensions could be taken any further.

"Before I ventured into politics, I used to complain about how long things took for the government to do but now, I understand that a cautious approach is one of the government's occupational hazards. I can tell you that the past 10 years have not been wasted," she said, referring to the time when the alarm bells were first raised about inadequate and unsustainable pensions.

She lamented that the Labour spokesman for social policy, Karl Chircop, had declined the invitation to speak at the event yesterday, reportedly because the Labour Party has not yet taken a stand on pension reform.

"This is a national problem and requires a national solution. One would hope that this issue does not become politicised," she said.

The other speaker was economist Edward Scicluna who quoted from international best practice and various studies to make the point that pension reform was holding up economic growth because of its drain on government resources, which had in turn forced it to raise taxation.

"Pension, health and education reform are unavoidable," he said, warning that the income from privatisation would not solve problems in the long-term.

"It has been shown that there are better chances of success at controlling debt if a government cuts expenditure than if it tries to raise revenue. In fact, there is a one in six chance of success if it raises revenue but a one in two chance if it cuts expenditure."