Pension reform in Malta should continue as the problems connected to its adequacy and sustainability continue to be highlighted in a new EU report.
According to a study on the growing role of private pensions in current EU pension systems, the European Commission states that the use of privately funded schemes in Malta is almost negligible and the system is still fully geared on statutory systems, something which needs to change.
Problems of adequacy and sustainability will continue to increase in the coming days as projections on the number of people aged 65 and over as a percentage of people aged 15-64 is expected to increase 114 per cent by 2050.
The current old age dependency ratio stands at 19 per cent. By 2050 it will go up to 40.6 per cent.
In 2006 the government introduced the first part of the long-awaited pension reform and legislated for a gradual rising of the retirement age and the maximum pensionable wage.
The new legislation also allows for the introduction of a compulsory second-pillar pension and a voluntary third pillar. But the government said at the time that the economic situation was not conducive to the introduction of mandatory contributions from workers and employers for the second pillar pension.
According to the EU report, despite these reforms the likely evolution of the current statutory pension scheme is still uncertain if more changes are not introduced.
"The government has to decide whether the system will develop in the direction of more flat-rate benefits or of strengthening the link between contributions and benefits," the report states.
"In case of flat-rate minimum pensions a reasonable level should be foreseen in order to cope with the poverty risk of older persons, especially women."
On the current situation of privately funded pensions in Europe the report confirms the trend towards more private pension provision in the EU but highlights the need for inclusive coverage and adequate pension levels. The study identifies large variations in coverage and contribution levels between EU countries, reflecting the diversity of schemes in place.
"Depending on their role within the overall system, low coverage in supplementary pensions, together with breaks in contributions, can become a cause of concern for future pension levels, in particular for those most at risk namely women, the young, lower-educated and low-paid," the report says.
On how many people are covered by the various schemes, the report finds that levels vary greatly depending on the particular member state and the type of scheme: statutory funded, occupational or voluntary pension provision. For instance coverage of statutory funded schemes ranges between 25 per cent in Italy and 100 per cent in Sweden and Malta.
For occupational pension schemes, Denmark, The Netherlands and Sweden have 75 per cent or more coverage, while Belgium, Germany, Ireland, Cyprus and the UK have between 40 and 75 per cent. However, most member states have a lower coverage than 20 per cent.
According to a study on the growing role of private pensions in current EU pension systems, the European Commission states that the use of privately funded schemes in Malta is almost negligible and the system is still fully geared on statutory systems, something which needs to change.
Problems of adequacy and sustainability will continue to increase in the coming days as projections on the number of people aged 65 and over as a percentage of people aged 15-64 is expected to increase 114 per cent by 2050.
The current old age dependency ratio stands at 19 per cent. By 2050 it will go up to 40.6 per cent.
In 2006 the government introduced the first part of the long-awaited pension reform and legislated for a gradual rising of the retirement age and the maximum pensionable wage.
The new legislation also allows for the introduction of a compulsory second-pillar pension and a voluntary third pillar. But the government said at the time that the economic situation was not conducive to the introduction of mandatory contributions from workers and employers for the second pillar pension.
According to the EU report, despite these reforms the likely evolution of the current statutory pension scheme is still uncertain if more changes are not introduced.
"The government has to decide whether the system will develop in the direction of more flat-rate benefits or of strengthening the link between contributions and benefits," the report states.
"In case of flat-rate minimum pensions a reasonable level should be foreseen in order to cope with the poverty risk of older persons, especially women."
On the current situation of privately funded pensions in Europe the report confirms the trend towards more private pension provision in the EU but highlights the need for inclusive coverage and adequate pension levels. The study identifies large variations in coverage and contribution levels between EU countries, reflecting the diversity of schemes in place.
"Depending on their role within the overall system, low coverage in supplementary pensions, together with breaks in contributions, can become a cause of concern for future pension levels, in particular for those most at risk namely women, the young, lower-educated and low-paid," the report says.
On how many people are covered by the various schemes, the report finds that levels vary greatly depending on the particular member state and the type of scheme: statutory funded, occupational or voluntary pension provision. For instance coverage of statutory funded schemes ranges between 25 per cent in Italy and 100 per cent in Sweden and Malta.
For occupational pension schemes, Denmark, The Netherlands and Sweden have 75 per cent or more coverage, while Belgium, Germany, Ireland, Cyprus and the UK have between 40 and 75 per cent. However, most member states have a lower coverage than 20 per cent.