The Government must act fast on the pension reform, as Malta is the only EU state with no second-pillar pensions, the Union Ħaddiema Magħqudin said yesterday in its Budget proposals.

Addressing a news conference, UĦM general secretary Josef Vella said the union’s primary concern is the future sustainability of pensions. He added it is now time for the Government to show some serious commitment in favour of the introduction of second-pillar pensions after years of discussion.

While first-pillar pensions are based on a pay-as-you-go system through which the current workforce finances current pensioners, the second-pillar is a mandatory funded pension plan where the individual puts aside money throughout his years of employment.

Mr Vella said that, for three-quarters of the working force, third-pillar pensions based on a private insurance are not affordable, and so the Government needs to look at other options.

The union is arguing that any productivity gains should be put aside to finance second-pillar pensions rather than being channelled to finance wage increases or profits.

The UĦM is also advocating changes to the welfare system to encourage more people to enter the labour market. Its main proposal is to introduce a system where unemployment benefits are tapered out gradually by 25 per cent over three years, rather than cut off abruptly when taking up employment.

The UĦM argued there are around 18,000 unemployed people receiving benefits, costing the country about 1.1 per cent of its total annual gross domestic product.

Mr Vella said that the current social benefit system discourages unemployed people to find work as they have to pay 10 per cent national insurance on the earned income.

This leads to a situation where the individual ends up worse off than those who opted to remain on unemployment benefits.

The UĦM is also urging the Government to consider granting an annual €900 allowance per child to parents on the minimum wage, which would cost €1.8 million.

Regarding the environment, the UĦM is making the case for the extension of subsidy schemes on photovoltaic and solar panels, as well as the introduction of rebates on energy efficient home appliances.

The UĦM is saying third-pillar pensions are only affordable for a quarter of the workforce. Photo: Darrin Zammit Lupi