Statistics confirm pensions time bomb

The low fertility rate and higher life expectancy have turned the pensions issue into a time bomb, according to David Spiteri Gingell, a leading consultant on the pensions reform.

Mr Spiteri Gingell, who had drafted the White Paper on pensions reform in 2004, said demographic statistics were showing the issue had to be addressed because it was a time bomb.

Speaking at a seminar on World Statistics Day last week, he said the country would eventually end up in a situation where there were more people receiving a pension and fewer contributing to it.

Apart from analysing past data, it was also important to project where that data was leading and policies should reflect this, Mr Spiteri Gingell said.

According to Malta in Figures 2010, live births in Malta between 1958 and 2009 were halved, with more than 8,000 births in 1958 plummeting to the present figure of 4,143. This translates to a birth rate of 10 per 1,000 people while the death rate last year was 7.8 per 1,000, with 3,221 dying, bringing the population down by 1.5 per cent to 412,970. The population as of 2008 stood at 413,609.

In July, a report issued by the European Commission placed Malta with a group of 15 member states that had problems relating to the long-term sustainability of their public finances and had called for urgent reforms in the pensions and healthcare sectors.

Shortly after, Prime Minister Lawrence Gonzi announced the government had started an internal exercise to take stock of the pensions reform, indicating that the second pillar of the reform – private pensions – would have to be “fine tuned”.

In an interview with The Sunday Times in November 2004, Mr Spiteri Gingell had warned that the status quo was not an option. “It willlead to a situation where revolutionary solutions will have to be implemented at some time,” Mr Spiteri Gingell had said.

Six years ago, his working group had proposed a three-pillar system: the first pillar, which is the two-thirds government pension with several proposed changes; the second pillar, where people will be obliged to put some savings into a private pension scheme; and an optional third pillar proposing tax incentives to encourage people to save in other pension schemes.