Labour MP Karl Chircop yesterday urged the government to come clean on its plans to introduce second and third pillar pensions.

He told Parliament during the pensions debate that it was worrying that the Bill on pensions reform authorised the minister to introduce second and third pillar pensions by regulation without parliamentary debate and without any indication of how these schemes would operate. Such schemes abroad had caused hardship for low income people when the national economy was weak, as was currently the case in Malta.

What portion of the national insurance contributions would be assigned to second pillar pensions? How would the government make up for this loss of revenue? Would this mean new taxes?

When would second pillar pensions be introduced? For which age brackets would the second pillar pension be mandatory? Would those workers outside those age brackets be given the option to join? Would the government help those who could not afford to contribute to a second pension?

Would people already having a private pension be affected by this system? Would they enjoy tax credits and how much? What would the administrative costs of the scheme be? At one per cent of GDP that would be Lm19 million. Where would that come from?

It would be irresponsible for the opposition to vote in favour of second and third pillar pensions without knowing how they would work, Dr Chircop insisted.

Reacting to Dr Chircop's comment on the economy, Education and Employment Minister Louis Galea said the opposition's thinking was muddled.

Even rich countries had raised their retirement age to 65 and more. The issue of pensions was based on the fact that the fertility rate had declined and people were living longer. In 45 years' time, whatever the state of the economy, there would be just 1.5 workers contributing for each pension, compared to four at present.

The pensions bill would therefore be unsustainable unless action was taken as of now.

Turning to second pensions, Dr Galea said pensions were not manna from heaven but were paid for through taxes and national insurance contributions.

The Labour government of the 1970s had made a huge mistake when it wiped out service pensions at a stroke. Had they been retained, more than 60 per cent of workers would now already have a second pension.

Now one would have to start afresh in more difficult circumstances because the pensions bill was much higher.

The government was acting in a socially fair and responsible manner. It had been told by its experts to introduce second pillar pension immediately to ensure that pensions were adequate and sustainable.

The government, however, acknowledged the burdens which a second pillar pension would impose on the workers and did not want to introduce such burdens at a time when they could not be shouldered by the workers, employers or the economy in general.

The law, therefore, would include a declaration of intent showing that Malta had to start thinking of a second pillar pension system.

The government was not asking the opposition to vote blindly on anything because regulations became law only after being tabled in the House, where they could be challenged.

As to Dr Chircop's questions, the government was saying that a second pension, when introduced, would be mandatory, with contributions being made by all employers and workers to second pension funds which would provide for the payment of a regular income or other benefits to the workers or their dependants upon reaching pensionable age.

Such second pensions would be introduced when economic circumstances were such that workers and employers would be able to afford them.

He could not say when second pillar pensions would be introduced or how much the contributions would be.

The government was also saying that workers not entitled to a service pension would be entitled to a guaranteed national minimum pension to all, adjusted not only on the basis of inflation but also the national median income.

Dr Galea said third pillar pensions would be voluntary.