The European Commission yesterday insisted that Malta should accelerate its pensions reforms that had started in 2006.
In a White Paper on the issue, the EU Executive stressed that Malta should move fast in raising the retirement age and encouraging private pensions schemes.
At the same time, the Commission recommended that the island should stop promoting “early retirement schemes” as these worked against the prevalent target to increase the employment rate among older workers in Europe.
Malta has one of the lowest employment rates in the 55-64- year-old category, with just 30.2 per cent of them being in employment in 2011.
The government-appointed Pensions Working Group had made 45 recommendations in 2010, including introducing an explicit link between pension age and life expectancy, launching a second-pillar pension subject to political consensus and the drawing up of a third pension framework. So far, none of these recommendations have been implemented.
Social partners, including trade unions and employers’ organisations, opposed the introduction of the second pillar pension, mentioning unsuitable economic conditions due to the recession at the time.
European Employment and Social Affairs Commissioner Laszlo Andor said in Brussels that “ensuring adequate pensions for the future is possible if all member states follow through on their commitments to reform.”
After 10 years of discussions with the social partners, Malta had introduced the first phase of pension changes in 2006, including raising the pensionable age to 65 for both genders by 2026 and lengthening the contribution period.
It had also changed the calculation of pensionable income from the best three years out of the last 10 years to the best 10 years from the last 40 years. A guaranteed national minimum pension payable at a rate of not less than 60 per cent of the median income for persons born after January 1, 1962 had also been introduced.
In 2007, the medical review for invalidity pensions was made more rigorous and, following the 2008 Budget, pensioners were allowed to keep on working without any reduction in the pension while paying social security contributions.
The European Commission feels such measures are not enough and has recommended that the raising of the retirement age be brought forward.
Like the working group, Brussels also recommends that the national retirement age should be measured against life expectancy, which is increasing substantially.
The EU has no remit when it comes to pensions as this is member-state territory according to the treaties. However, the Commission yesterday insisted that it wants to support pension reforms in member states as time is running out.
Main aims of EU White Paper
- Create better opportunities for older workers to remain in jobs by adapting workplace and labour market practices and using EU funds.
- Develop complementary private retirement schemes and optimise tax and other incentives.
- Make supplementary pensions compatible with mobility through legislation protecting the pension rights of mobile workers and through pension tracking services across the EU.
- Enhance the safety of supplementary pension schemes.
- Promote longer working lives by linking retirement age with life expectancy, restricting access to early retirement and closing the pension gap between men and women.
- EU to continue to monitor the adequacy, sustainability and safety of pensions.