The Bill amending the Social Security Act to provide for the third pillar pension – making it possible for people to voluntarily take up a private pension to top up the State pension – was yesterday approved through the second and committee readings.

Winding up the debate, Social Solidarity Minister Michael Farrugia said the amendments should come into force by the end of the year in line with what the Finance Minister had established in last year’s Budget.

Discussions on changes in taxation benefits for those taking up the third pillar pension would start immediately.

He said the Opposition’s proposal for the government to opt for the second pillar pension before the third was proof that Malta’s economy was on the rise.

With reference to poverty, Minister Farrugia underlined the importance of social welfare but being in gainful employment was of utmost importance.

Statistics last year showed almost 22 per cent of elderly people in Malta were at risk of poverty and a total of 24 per cent could not afford to heat their homes adequately

People in need should be identified, assisted and reintegrated into the workforce.

Combatting poverty called for a multifaceted approach, and to recognise how many people were under the poverty line was a good start. However, there was still no formula for how such benefits could raise someone to a better state in life.

Opposition spokesman on social solidarity Clyde Puli warned that the Bill would not address the issue of adequate pensions, asserting that pensions today were sustainable because they were not adequate. A holistic strategy needed to be introduced.

The PN administration had presented various reforms to the first pillar pension system, including gradually increasing the retirement age to 65. The first pillar was the current pension system through which social security contributions provided for current pensions and not for the contributor’s future pension.

However, the government was moving directly to the third pillar, which would be voluntary and not mandatory. This meant that those who did not have an adequate income would not be able to invest in this system and the pension system as a whole would not improve.

Another PL electoral promise had been to start a process through which the national minimum pension would total 60 per cent of the national average wage. The third pillar pensions system would not cover this promise.

Statistics published by the NSO showed that last year, almost 22 per cent of elderly people in Malta were at risk of poverty and a total of 24 per cent could not afford to heat their homes adequately.

Tonio Fenech (PN) said that by skipping the second pillar, the government was confusing the people. The government was presenting the third pillar without a structure and a holistic plan for adequate pensions and this was giving false hope.

While it agreed with the Bill, the Opposition’s concern with the third pillar pension was that it would not be enough to give an adequate pension to youths and middle-aged people who would be depending on it for their quality of life.

Mr Fenech said that the fiscal benefits to be given to those taking out a third pillar pension were too little if the government seriously wanted to help the individuals who wanted to plan ahead.

Parliamentary Secretary Justyne Caruana said the elderly constituted a quarter of the population.

This meant there were many challenges ahead, mainly the financial aspect as the elderly faced poverty and social exclusion.

Another challenge was when it came to the elderly re-employing themselves – employers needed to acknowledge that the elderly were an asset and should be helped to remain active and working.

With almost 6,000 sufferers, dementia was another challenge.

Parliamentary Secretary Jose Herrera said that with an ageing population, the number of pensioners in relation to employed people was always on the rise.

The current capping of pensions was no longer appropriate. But he admitted that the government did not have enough provision at present, let alone if it raised the capping to reflect the cost of living.

Anthony Agius Decelis (PL) said that while existing social benefits would remain in force, the government had to encourage diligence and the culture of saving.

This would enable people to have more money in their pockets even when they retire.

Labour MP Charles Mangion said pension sustainablity was a real issue when one assessed the projected increase in the ageing population and it was not fair to postpone this issue for future generations to deal with.

The government has taken this initiative at an opportune time when the economy was bouyant, the deficit was being reined in and Malta had registered the lowest level of unemployment for years.

Silvio Parnis (PL) said it was not true that the government was not giving priority to those under the poverty line and the socially excluded. On the contrary, it was striving to increase the standard of living through incentives such as free child care centres and the reduction of electricity and water tariffs.

One had to keep in mind that the introduction of the third pillar pension system would not affect the other types of pensions and was not obligatory.

It was important to address the current realities and requirement of adequate pensions, he said.