The government is studying the introduction of private retirement schemes funded by employers and employees to supplement the present state pension, a measure known as pillar 2 of the pension reform set into motion four years ago.
"A team under the direction of the Social Policy Ministry has started taking stock of the pension reform and we will be considering whether the time is ripe for some fine tuning, particularly with regard to the introduction of the second pillar," the Prime Minister said yesterday.
His comments came at the end of an EU summit in Brussels and following a report by the European Commission which urged the government to introduce with "urgency" reforms in the pension and healthcare sectors to assure the long-term sustainability of Malta's public finances.
While in the short and medium term Malta is coping financially with EU targets, the situation is not deemed sustainable in the long term, especially when the growing spending on health and pensions is factored in.
After almost 10 years of discussion, in 2006 the government had introduced changes to the Social Security Act to start a gradual overhaul of the pension system.
The first phase - pillar 1 - consisted of a staggered increase in the retirement age from 61 to 65 years and in the regular contribution period to the state pension from 30 to 40 years.
The reform included the introduction of a second pillar, which would see the setting up of private pension schemes with contributions by employees and employers over and above the national insurance contributions, which are still needed to sustain the basic pension as a guaranteed safety net. Pillar 3 would consist of voluntary contributions in an approved scheme.
Under the current law, the government is legally bound to carry out a periodic, five-yearly strategic review of the reform so changes are introduced to reflect evolving circumstances. The law stipulates that the first review must be carried out and presented to Parliament by not later than December 31, 2010. According to the Prime Minister, the government will now be considering the introduction of the second pillar pension.
EU leaders yesterday agreed on a new strategy for growth and jobs, known as the EU2020 strategy, with member states being bound to observe five key targets to sustain the union's economic edge.
The headline targets agreed include raising to 75 per cent the employment rate for men and women aged 20-64; an investment target of at least three per cent of GDP in Research and Development; a reduction of greenhouse gas emissions by 20 per cent compared to 1990 levels; a reduction of school dropout rates to below 10 per cent and taking 20 million people out of the risk of poverty.
"We agreed with these targets as we believe these are the recipe for growth in the EU," Prime Minister Lawrence Gonzi said. "Although in certain areas we will need to pull our socks up, in others we are already in a good starting position," he said.
According to the summit's conclusions, member states must now act to implement the policy priorities at the national level.
With regard to a proposal suggested by the Commission to introduce a levy on banks to build a fund that would make good for a second financial crisis, Dr Gonzi said Malta agreed with the proposal in principle "as long as it is introduced on a global level."
"We have nothing against this levy but we are after a level-playing field," he said.
The issue, together with other proposals for more regulation of financial services, will now be tackled by the EU at a G20 summit in Toronto later this year.