The Prime Minister has reiterated his stance against the introduction of second pillar pensions or any further raises in retirement age, saying that this government was looking at alternative measure to address pensions’ sustainability.

Photo: Mark Zammit Cordina

Joseph Muscat was addressing a one-day conference organised by the Institute of Financial Services in collaboration with Times of Malta at the Hilton Conference Centre in Paceville. Business editor Vanessa Macdonald moderated the debate.

The Prime Minister was reacting to an earlier call made by Opposition deputy leader Mario de Marco, who urged the government to start the debate on second pillar pensions.

However, Dr Muscat reiterated his stance that such a measure would not be considered for the time being saying that thousands of families would not afford to dedicate another significant part of their income towards a pension fund.

While acknowledging that on this particular issue both parties were “far apart” he expressed his belief that they could still work together to address this challenge.

He said that the current social security system needed reform or else it would become “irrelevant”.

“A cleaner with three part-time jobs would end up in poverty once she retires as the present system takes into consideration one source of income for the contributory pension,” he warned.

In his address the Prime Minister criticised the 2006 pensions’ reform which paved the way for raising of retirement age to 65 years, saying that it fell short of expectations despite coming after a 10-year debate.

“It looked at future retirees and not at the present problem, as pensioners are nowadays facing poverty,” he said. He also criticised the reform for leading to a huge increase in public deficit, which then led to repeated warnings from the EU Commission and credit rating agencies.

Dr Muscat remarked that the Labour government has started addressing the problem, by setting up a pensions’ strategy group tasked to come up with a plan to address present and future problems.

This strategy aims to have clear objectives, and will address the low employment rate through measures intended to raise female participation rate and open up opportunities for an aging workforce, while luring people above retirement age to remain in the employment sector.

Photo: Mark Zammit Cordina

Earlier, Opposition deputy leader Mario de Marco called for a bipartisan approach to address the pension challenge.

“This is an issue that cries out for a bipartisan approach. Politicians should follow technocrats and not the other way round,” he said.

While acknowledging that second pillar pensions might put financial strain on employers, he argued that now was the right time to start looking at this model, in the context of the healthy economic growth being registered in Malta.

He also raised concern that the increase in public sector employees, which has soared by some 3,000 workers in the last two years could put further strain on pensions’ sustainability.

While welcoming the recent introduction of third-pillar pensions, he expressed his disappointment that the incentives were not attractive enough to lure low-income earners to start saving from now.

Finance Minister Edward Scicluna will be addressing the seminar later this morning.