Policy makers mapping out pension reform must ensure all stakeholders are provided with a blueprint with clear time frames, and endeavour to tackle the matter holistically in line with other social and economic policy objectives, the Malta Chamber of Commerce, Enterprise and Industry has urged.
The success of pension reform, the Malta Chamber stressed, lay largely with the private sector as the driver of economic growth.
The Malta Chamber has submitted its views and recommendations on the 2010 Pensions Working Group report – ‘Strategic review of the adequacy, sustainability and social solidarity of the pensions system’ – for which the consultation period has just closed. The recommendations are also endorsed by the Malta Hotels and Restaurants Association.
The Chamber follows other bodies, including the Malta Employers Association and the Malta Institute of Management, to issue its views and recommendations.
“The way forward is about continued economic growth and the development of voluntary third pillar pensions to supplement the present system,” Malta Chamber president Tancred Tabone told The Times Business.
“We are primarily interested in income generation and wealth generation. It would be impossible to distribute wealth unless it is increased or generated. Firms would introduce people into private pension schemes much the same way as they enrol employees into private health schemes. It would become part of the employee’s package. It also makes firms which introduce pension schemes better employers.”
In its recommendations, the Malta Chamber said fiscal incentives and a sound regulatory system had to be in place before implementation of the third pillar pension framework to maximise take-up.
Private sector and the pension reform
It pointed out international experience had shown that the third pillar pension increased the income of individuals once they are past retirement age, and alleviated the financial burden on the social security system, and it stimulated private savings.
The Malta Chamber said it was not in a position to consider the compulsory second pillar until precise details are publicised about its possible implementation, although it did say it could have serious social and economic implications.
Mr Tabone believed Malta’s smallest businesses, even family businesses, would be willing to voluntarily offer pension schemes to staff. The handful of employees engaged by micro enterprises was often considered part of family, trusted with the owners’ wealth.
“I am a firm believer in private enterprise,” Mr Tabone said of the business community’s ability to take on the reform. “The government should govern. But employers and employees need to have an indication of the timeframe so that they can prepare for it. If people know that the third pillar will be introduced in, say, 2013 or 2104, employers can plan. I hope we will have a date set in the next few months.”
Mr Tabone added the third pillar also created a new market activity which private industry will examine for opportunities to develop, and save government money.
Kevin Borg, the Malta Chamber’s director-general, pointed out firms’ implementation of private pension schemes would increase the cost of labour so it was imperative policy makers factored in issues like the cost of living adjustment, education, health, and wage indexation so that pension reform is charted in a way that effects on stakeholders are “well planned and complimentary”.
While embarking on such a complete strategy, policy makers had to ensure Malta’s competitiveness is safeguarded. If economic growth stopped, pension reform risked being shelved.
Asked whether this was the right time to be discussing pension reform given the current world order, Mr Tabone replied: “Is there ever a right time? Our private sector is frugal. Our banks have always lent money on collateral. History has proven us right time and again. We are in better shape than most people. We just need to allow private sector to continue to generate wealth. That is the only way Malta will prosper.”