The government has no intention of introducing mandatory second pillar pensions this year but is to initiate discussions in order to reach a consensus over the issue, according to Finance Minister Tonio Fenech.

Although the European Commission has been stressing the need for Malta to accelerate its pension reform programme – introduced in 2005 – in order to guarantee the long-term sustainability of Malta’s public finances, Mr Fenech said that the government is currently analysing the Pensions Task Force’s review report and will be taking the necessary measures to introduce its recommendations gradually.

However, he ruled out the possibility that mandatory private pensions will be introduced this year.

According to the Task Force a mandatory private pension scheme targeted at people under 45 should be introduced immediately and the pensionable age should be tied to an index on life expectancy. The task force warned that further postponement of the second pillar pension “would only exacerbate the issue relating to the adequacy of the average pension replacement rate and, thereby, require, potentially, more drastic measures in the near future.”

The task force suggested that until the method on how the second pillar pension would work was discussed and decided upon, it suggested the introduction, as from early 2011, of a voluntary third-pillar pension which allows the possibility to switch funds to the second pillar once that became available. The report stressed that the country could not keep postponing the introduction of the second pillar pension because the present system was becoming increasingly insufficient for pensioners to enjoy the quality of life they were used to.

The report was commissioned by the Employment Ministry which sought a strategic review of the adequacy, sustainability and social solidarity of the pension system five years since the pension reform of 2005.

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