The Nationalist Party had made a clear declaration on television that it would raise the retirement age to 66 and increase the NI contribution for employers and employees, Social Solidarity Minister Michael Farrugia told Parliament last night.
Speaking during the debate in second reading of the Bill amending the Income Tax Act, Dr Farrugia said this was the difference between the government and the Opposition. The PL had already promised, before the general election, that it would not raise the retirement age and that it would strive to keep pensions sustainable. Poverty was not a mere perception, as the former Prime Minister had argued. Having accepted the existence of the problem, the government analysed ways to tackle it. One could stress the importance of education, of encouraging people to be employed and to pay all their contributions in order to have a better pension.
The PL had already promised, before the general election, that it would not raise the retirement age and that it would strive to keep pensions sustainable
If the Opposition desired, it was more than welcome to take part in debates to implement a national minimum pension (60 per cent of the medium wage) to help the elderly escape poverty.
Interjecting, Opposition MP Tonio Fenech said this was a Labour electoral promise and, therefore, did not need the Opposition to implement it.
Dr Farrugia noted that the Opposition did not want to contribute to such a debate.
The Opposition could not understand that Malta had a high rate of illiteracy. The government, which inherited this problem, was taking measures to ensure that students who were not studying or who were not employed would be provided with the necessary training.
Earlier, contradicting Mr Fenech, Mr Farrugia argued that the introduction of the second pillar system would not solve anything. What the Opposition was suggesting was that employers and employees paid a national contribution over and above what they paid at present.
Winding up the debate, Finance Minister Edward Scicluna said taxpayers had a reasonable wage and could therefore be expected to be able to save up for the future, whilst those who were tax exempt already had low incomes and could not be expected to take up the third pillar schemes.
It was for this reason that a tax rebate was chosen as an incentive to adopt one of the pension schemes under the third pillar, he said. The amendments put forward two types of schemes which applied to a couple, either married or living together, where at least one was in gainful employment.
Prof. Scicluna said that through one of the schemes, an individual could opt to deposit around €1,000 in his own name and another €1,000 on behalf of one’s partner or spouse. In that case no witholding tax would be paid on this amount.
Moreover, contrary to what happens with the usual government national insurance, the individual saving up the €1,000 has the opportunity to voluntarily withdraw them at any point in time.
The second pension under the third pillar makes provision for a couple to save up to €2,000 in the name of both, even though only one partner in the relationship is in employment.
The third pillar was completely optional, in accordance with the financial means of the individual undertaking it and at any one time a couple could amass around €4,000 between them in additional savings.
The basis for these new schemes was already in place and would be implemented immediately.
The Bill was unanimously given a second reading and passed through committee stage.
‘Too little, too late’
Nationalist MP Kristy Debono said it was a step in the right direction to establish the third pillar pension but added that it was “too little too late” and would not have any effect on pension adequacy.
Dr Debono said that one needed to address pension sustainability. Action taken by the previous administration had addressed the issue of an aging population.
Since the election, the Opposition had made concrete proposals, she said. The first pillar pension would not be sufficient by 2060 when it was expected that public expenditure on the elderly would amount to eight per cent of GDP.
The number of working people supporting pensioners would be halved in a few years’ time. The labour supply would fall by 14 per cent when the number of pensioners is expected to increase to 31 per cent of the population. One had to seek new streams of revenue such as accruing from the increase in the female and elderly employment participation rates.
She called on the government to present regular updates on the take-up of private pension schemes and insisted that immediate talks be held on the introduction of a mandatory second pillar pension with stakeholders.
She was conscious, she said, that the introduction of such a scheme would affect a person’s disposable income and standard of living but insisted that gradual decisions had to be taken.
Dr Debono called on the government to reconsider the budgetary measure of taxing income on dividends at 35 per cent because there were pensioners who depended on such income.