MLP promises to repeal raising of the retirement age

A new Labour government would, as quickly as possible, repeal the raising of the retirement age which the present government was introducing, Labour spokesman Karl Chircop told Parliament yesterday.

The number of social security contributions needed to make one eligible for a state pension would be scaled back to the equivalent of 30 years, not 40 years as proposed in the new , Labour spokesman Karl Chircop told Parliament yesterday.

Resuming his speech from Monday's sitting, Dr Chircop insisted that this Bill was creating a basis for new social taxes. He reiterated that those who earned the least would be getting only a one per cent increase in their pension under the new system, while those who earned the most would be getting a 33 per cent rise.

It was no surprise that the trade unions were against this legislation, notably the Malta Union of Teachers and the Malta Union of Midwives and Nurses.

The tax burden in Malta was already too heavy. EU figures showed that over the past six years the tax burden in Malta had nearly doubled and the situation was made worse with the power surcharge. Eurostat also showed that Malta had the seventh highest inflation rate and one of the longest working days.

Dr Chircop observed that those receiving a non-contributory pension were not included in the Bill even though they were earning less than others. Pensions legislation, he said, should be revamped rather than patched up because each time it was being amended there were categories that were being left out. Among them were the part-timers, former servicemen, former shipyard employees and impressed drivers.

But the opposition believed that changes in the pensions system could not be implemented before wider changes in other sectors such as health, education and other social benefits were carried out.

And the government should seek an electoral mandate before reforming pensions in the way it was proposing.

Marie Louise Coleiro (MLP) said the Bill was misleading and deceptive, as well as being socially unjust. It was also politically opportunistic because it was relieving the problems of the few and exacerbating those of the many.

After ten years of studies the government had presented a half-baked solution, shorn of all the important details.

The government had pretended to be scandalised because Labour was saying that the pension reform was not the most pressing problem. But clearly a lot more needed to be done for the pensions reform to be holistic.

What the country needed to do first was tackle its pressing financial problems, inflation and unemployment and extensively modernise the social welfare system and education.

Referring to some aspects of the Bill, Ms Coleiro said there was a limit to how long women could work in certain professions, but the government was simply raising the retirement age to 65 for everyone.

Ms Coleiro said the extension of social security credits to cover payments missed by parents who stopped working to care for their young children was positive. But the way how the national minimum pension was to be calculated - on the basis of 60 per cent of the national median income - was a travesty. This did not mean the average wage but the level which the EU used to establish the poverty level. Many pensioners, therefore, would be worse off.

The extension of the required social security contributions from 30 to 40 years of work was unjustified and would adversely affect the pensions of many people. Furthermore it was unfair that people who started working at 16 would not have the first two years of their social security contributions credited for pension purposes.

Opposition deputy leader Charles Mangion referred to the new system for the computation of social security contributions and said the result would mean lower pensions since the pension would be calculated over an average of 40 years, not the last 10 years of a worker's employment, which were usually the best paid.

Dr Mangion insisted that the government should have tackled problems involving non-contributory pensions, especially since some 80 per cent of beneficiaries were in the risk of poverty.

He also insisted that pensions reform needed to be holistic. What the government was doing was trying to raise its revenue and at the same time adjust tax levels because of approaching elections.

He observed that according to last year's annual financial statements, social security contributions amounted to Lm175 million. Contributory social benefits had cost Lm162 million. This meant a surplus. Even with the proposed changed capping the surplus in contributory pensions would continue to be there. The pensions fund only went haywire when one included health services and care for the elderly in the equation as well as non-contributory pensions which amounted to Lm58 million.

Planning for the future meant prioritising the most pressing problems, although all needed to be solved eventually. The lack of sustainability in the social sectors stemmed from bad management by the government, which in 20 years had left a heritage of Lm1,500 million in national debt and huge debt servicing costs.

This was why Labour was saying that priority should be given to tackling the country's major problems, notably the deficit, the public debt, government spending in general and economic growth. Only that way could pensions be sustainable.

Ways also needed to be found to raise the participation rate in the work force, particularly by women.

Silvio Parnis (MLP) gave a brief overview of the history of social services in Malta, saying Labour had a rich heritage in this sector. This, he said, was one of the reasons why Labour was still taking pensions and other social issues seriously.

The necessary social changes in Malta brought with them the need of a lot of hard work, especially to help those who could not help themselves.

Quoting from Labour's document on pensions, Mr Parnis said that, mindful of its potential to be returned to power, Labour was intent on doing everything possible to ensure sustainable pensions for all strata of Maltese society.

Government MPs' remarks are being reported separately.