Malta yesterday made it clear it did not subscribe to recommendations by the European Commission to raise the retirement age further and officially asked Brussels to revise its proposal.
Intervening during a Council meeting of Employment and Social Policy Ministers in Luxembourg yesterday, Minister Chris Said argued that the Commission’s recommendation made no sense from a demographic point of view.
According to the island’s projections, the current threshold was sufficient to its needs, he said.
Reminding his colleagues that Malta had already raised the retirement age from 60/61 to 65 years, he said that “this progression to 65 years has elements that already go beyond what is currently required by Malta’s demographic profile”.
According to Dr Said, the wording in the Commission’s recommendation is too prescriptive to be of any benefit.
“We ask for the recommendation to be changed to remove any text which implies that the current age of 65 is too low.
“This assertion by the Commission is simply not supported by Malta’s demographic profile at least until 2029,” he insisted.
In its country-specific recommendations issued individually to each EU member state last month as part of the EU’s stability programme, the Commission said Malta’s current pension reform had to be stepped up as it was not sustainable in the long-term.
According to Brussels, the current progressive increase in the retirement age up to 65 years is not adequate and needs to be accelerated, while a clear link between the statutory retirement age and life expectancy needs to be established, implying raising the 65-year threshold.
The recommendations, which are binding, would have to be approved by member states before coming into force.
Despite Malta’s objections, Brussels has been insisting for a long time on the need of accelerating pension reform.
The latest Ageing Report published by the EU a few weeks ago warned that Malta would be facing severe consequences in the coming years if the country did not push forward its pension reform. The report classified the island as one of seven EU member states with the most “significant age-related increase in public spending”.
Based on scientific and demographic projections up to 2060, the report shows that Malta’s expenditure on old-age related matters, particularly pensions, is expected to increase by eight to 11 per cent of GDP by 2060 on the current 21.5 per cent of GDP. The dependency ratio – the number of working population in relation to those who are not working and need state assistance – will increase by 37 per cent.
Malta introduced the first phase of its pension reform in 2006 with an increase in pensionable age to 65 years for both genders by 2026 and lengthening the contribution period.
It also changed the calculation of pensionable income from the best three years out of the past 10 years to the best 10 years from the past 40 years and introduced a guaranteed national minimum pension payable at a rate of not less than 60 per cent of the median income for people born after January 1, 1962.
Since then, no new concrete measures have been introduced, although a review with 45 recommendations for further reform, including the introduction of a second pillar pension, had been presented to the government by the Pensions Working Group in 2010.
A consultation process was held, ending late last year with the final conclusions being communicated to the governmentlast month.
According to Dr Said, the report is still being discussed by the social partners.
Before the 2006 introduction of the first phase of the pension reform, the social partners had been discussing it for more than 10 years.