Alfred Sant suggests rethink on second pillar

Labour MP Alfred Sant has called upon the government to rethink its position on the second pension pillar which would force workers to enter into private pension schemes to ensure an adequate pension on retirement because the present system was not sustainable.

Speaking during the debate on the Bill amending the Social Security Act, Dr Sant said the pensions reform group had accepted the World Bank model that NI contributions by Maltese workers be put in a fund to be managed by private institutions.

He said the group was acting in haste and it did not take into consideration what would happen in the next four or five years’ time. If such funds collapsed, it would have to be the government which would be called upon to mount a rescue operation and guarantee the pensions.

The historical record for the last 50 years, where the government respected its obligations to pay out pensions, has shown that the contract could continue to be followed irrespective from dogmas from Washington and Frankfurt. Malta’s system had a big underinvestment in the human infrastructure and a low employment participation rate. One should see how to change these parameters and make pensions sustainable without reverting to the second pillar. It might well be that if the present system was managed differently it would become sustainable. It has still to be proven that the second pillar option was the best way forward

What was needed was more transparency because the gap did not compare like with like in health, pensions or welfare.

Earlier, Opposition spokesman for economic development Charles Mangion highlighted the link between the problem of pension sustainability and the national debt, saying that the long-term sustainability of public funds was hindering the economic growth. This also affected the health care system.

The government itself had pegged pension sustainability and debt in the national reform programme, which emphasised the importance of economic growth.

Dr Mangion said that despite the increase in Malta’s ageing population, the percentage of contributory pensions as part of government income remained at 26 per cent.

After an amendment four years ago, the pensionable age was raised to 65. The people were given the impression this increase would last longer than four years and this was one of the reasons the PL did not want to have pensionable age linked with life expectancy.

Malta was one of the countries having the least number of people entering the employment market. If sustainability of pensions was to be addressed, labour participation should reach 65 per cent, thus yielding around 24,000 full-time jobs leading to €70 million per year in NI contributions.

Dr Mangion said it was relevant that out of 146,000 people employed full-time, only 63,000 earned over €17,000 per year.

Competition should also be addressed because it was being undermined by exorbitant administrative costs which were five times higher than the European average.

Families feel that their wages were not enough to provide them with a dignified living standard. The cost of living was simply too high for some families and therefore they could not be asked to invest in a private pension. One could not impose the entire burden on employers.

Dr Mangion said it was important to strengthen the first pillar – the pay-as-you-work pension scheme – through efficient national expenditure and curbing abuses.

Opposition spokesperson on family affairs Justyne Caruana said that it was positive to note that more patients would now be entitled to free medicines. However, it was important to ensure that these would be permanently available at pharmacies.

Although the number of free medicines which treated sexually transmitted diseases had increased, it was disappointing that the sexual health policy was not yet in action. She urged the minister to address this matter urgently.

Dr Caruana said that there had recently been an increased number of illnesses in Gozo and many patients had to come to Malta for medical care when this should be made available in Gozo.

There needed to be serious rethinking on pensions and help to the disabled since these did not reflect the current needs. One had to keep in mind that a substantial number of women in Malta did not work and would thus find themselves in difficulty when they were older. It was important to encourage more women to take up work. Furthermore, family-friendly measures, such as working reduced hours, had to be extended to the private sector.