No decision has been taken to raise the retirement age and there was no agreement this should be the case, the government said this evening.
In a statement replying to claims by PL economic affairs spokesman Charles Mangion, the government said Dr Mangion showed the Opposition's political incompetence and how bad its advice had been.
The government said that countries which did not take action regarding their pension systems had to increase the retirement age at one go, increase taxes and reduce social benefits.
Had the government done as the opposition wanted, Malta would have ended up in a situation similar to Greece, Spain and Portugal.
But the Maltese government continued to increase investment in the social sector and people who reached retirement age had the option of retaining their job while receiving their full wage and pension. Pensioners were also being given the full increase.
In agreement with the unions, employers and civil society the pensions system was analysed for further improvements so that pensions would be adequate.
This was a political committment for the benefit of workers and young people.
The Pensions Working Group, the government said, presented its report following a consultation process based on proposals it had received.
Dr Mangion said this morning the Labour Party disagreed with raising the retirement age once more, but agreed that second pillar pensions should be introduced, once economic conditions allowed.
He said the PL strongly disagreed with a commitment which the government appeared to have given to the EU to link the retirement age to life expectancy, which would ultimately mean a further raising of the retirement age.
The retirement age was raised to 65, five years ago, as part of reforms which were meant to serve to 2027, Dr Mangion said, and rather than raising the reitrement age, the government should now be focusing on raising the participation rate, thus ensuring that pensions were sustainable through having more social security contributions.
Dr Mangion revealed that the Labour Party is - for the first time - participating in consultations with the Pensions Reform Working Group, which is conducting the statutory review, five years after the pensions law was enacted. It was thus surprising how the government had made commitments to the EU while this review was still in progress.
He said that it was important that the basic first pillar pensions were strong, and he suggested that part of the NI contributions, instead of going straight to the general government coffers, be hived off to a dedicated pension fund.
The Labour Party, he added, agreed that a mandatory second pillar pension scheme - where workers and their employers contribute to a private pension - should be introduced, but only when economic conditions allowed, so as not to undermine industrial competitiveness or people's purchasing power.
The PL, he said, also agreed on voluntary, third pillar pensions - voluntary contributions to private pension schemes. These, he said, should be encouraged through fiscal incentives.
In January, Finance Minister Tonio Fenech said the government had no intention of introducing mandatory second pillar pensions this year but was to seek consensus over the issue.
Although the European Commission has been stressing the need for Malta to accelerate its pension reform programme 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.
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.