Bleak times for pensioners
This year has not been a good year at all for pensioners. The high inflationary pressures, especially in food- and energy-related products, have been difficult for many pensioners to absorb. Now the situation has been complicated by the massive erosion...
This year has not been a good year at all for pensioners. The high inflationary pressures, especially in food- and energy-related products, have been difficult for many pensioners to absorb. Now the situation has been complicated by the massive erosion in their savings as a result of the unprecedented fall in the values of investments in financial markets. Nor does the situation look any better for those baby-boomers planning to retire over the next 10 years.
Over the past several years Maltese investors have been steadily shifting their savings from boring bank accounts to the more exciting equities, either directly or through collective investment schemes. Reliable statistics of how much money the Maltese have invested in equities are hard to find.
However, it is no secret that local banks and other financial services companies have been promoting collective investment schemes that gave them much better fee income than the traditional deposits. Some actively encouraged their deposit-holding clients to shift to equity and bond-based collective investment schemes.
Now, when many pensioners are receiving statements about the value of their investment as at the end of September, they are realising that this year alone they may have lost between 30 per cent and 50 per cent of the value of their holdings. Those investing in some of the local stocks quoted on the Malta Stock Exchange may have suffered similar losses.
These are the real victims of the recent financial crisis. Of course, shares will eventually rebound. But nobody knows when. Neither are the personal circumstances of all pensioners the same. To make matters worse many have panicked and crystallised their losses by selling their investments at the worst possible time.
The era of the "share owning democracy", as a past finance minister dubbed the 1980s and the 1990s, is over. The perception of wealth created by soaring values of homes, rapid equity investment appreciation and unrealistic expectations that things could only get better have been dashed in just a few months.
The pension reforms announced some time ago will do very little for current pensioners and those planning to retire in the next 10 years. There is little if any chance of the maximum state pension being revised significantly upwards. If these pensioners have now lost most of their savings, then indeed they are facing bleak times.
Many financial advisers in Western democracies are advising people approaching retirement to accept the fact that they need to save more and work more. Many workers are doing so out of necessity and not out of choice. In Malta the situation could be more serious.
Many of our employers still suffer from ageism - a mentality that anyone above 50 is not worth employing. Unless the government creates incentives for employers to take on older workers, the situation will not change in any reasonable time. The effect of inaction will be that many more people who have already retired, or are about to do so, will slowly but surely slip nearer the poverty line.
There is also a need for the creation of a non-profit-making organisation to be set up to act as a pressure group against, or to even fight, ageism at all levels. Many pensioners are already suffering because of their inability to cope with increasing prices of medicine, food, fuel and other basic commodities. They need to make their plight known by every means possible to ensure that public opinion is sensitised about the unfairness of dumping thousands of ageing people on the human scrapheap.
While people still in employment can cope with the difficult economic situation by abandoning retail therapy and embracing thrift, there are many others out of work, or about to retire, who need to be given a chance to help themselves.
Equally important when new fiscal policies are introduced, or services liberalised, we must ensure that those who are most vulnerable are protected from poverty.
These are the values that will make our society richer, not only morally but eventually also economically.
Over the past several years Maltese investors have been steadily shifting their savings from boring bank accounts to the more exciting equities, either directly or through collective investment schemes. Reliable statistics of how much money the Maltese have invested in equities are hard to find.
However, it is no secret that local banks and other financial services companies have been promoting collective investment schemes that gave them much better fee income than the traditional deposits. Some actively encouraged their deposit-holding clients to shift to equity and bond-based collective investment schemes.
Now, when many pensioners are receiving statements about the value of their investment as at the end of September, they are realising that this year alone they may have lost between 30 per cent and 50 per cent of the value of their holdings. Those investing in some of the local stocks quoted on the Malta Stock Exchange may have suffered similar losses.
These are the real victims of the recent financial crisis. Of course, shares will eventually rebound. But nobody knows when. Neither are the personal circumstances of all pensioners the same. To make matters worse many have panicked and crystallised their losses by selling their investments at the worst possible time.
The era of the "share owning democracy", as a past finance minister dubbed the 1980s and the 1990s, is over. The perception of wealth created by soaring values of homes, rapid equity investment appreciation and unrealistic expectations that things could only get better have been dashed in just a few months.
The pension reforms announced some time ago will do very little for current pensioners and those planning to retire in the next 10 years. There is little if any chance of the maximum state pension being revised significantly upwards. If these pensioners have now lost most of their savings, then indeed they are facing bleak times.
Many financial advisers in Western democracies are advising people approaching retirement to accept the fact that they need to save more and work more. Many workers are doing so out of necessity and not out of choice. In Malta the situation could be more serious.
Many of our employers still suffer from ageism - a mentality that anyone above 50 is not worth employing. Unless the government creates incentives for employers to take on older workers, the situation will not change in any reasonable time. The effect of inaction will be that many more people who have already retired, or are about to do so, will slowly but surely slip nearer the poverty line.
There is also a need for the creation of a non-profit-making organisation to be set up to act as a pressure group against, or to even fight, ageism at all levels. Many pensioners are already suffering because of their inability to cope with increasing prices of medicine, food, fuel and other basic commodities. They need to make their plight known by every means possible to ensure that public opinion is sensitised about the unfairness of dumping thousands of ageing people on the human scrapheap.
While people still in employment can cope with the difficult economic situation by abandoning retail therapy and embracing thrift, there are many others out of work, or about to retire, who need to be given a chance to help themselves.
Equally important when new fiscal policies are introduced, or services liberalised, we must ensure that those who are most vulnerable are protected from poverty.
These are the values that will make our society richer, not only morally but eventually also economically.