Why does sustainability always get into the way of better pensions? Carmelo Mallia, president of the Pensioners’ Alliance, tells Kurt Sansone that pensioners ­– who are finding it difficult to make ends meet – should not be lumped with the burden of sustainability.

Carmelo Mallia, 77, is miffed because the word ‘sustainability’ keeps being shoved in pensioners’ faces whenever they ask for better pensions.

He wonders why sustainability does not feature when politicians speak about university stipends, exorbitant wages for consultants and millions spent on quick-fix expropriations.

At the head of the Pensioners’ Alliance, an umbrella organisation made up of 16 groups, Mr Mallia is worried that current pensioners are finding it difficult to make ends meet and poverty is a reality some have to deal with.

“It’s not that I want stipends to be removed but it is unfair for pensioners to be lumped with the burden of sustainability every time they ask for pensions to improve,” he says.

Mr Mallia explains that had national insurance contributions been ring-fenced since 1974, when the mechanism was introduced, the country would today have a pension fund with a surplus of €700 million. But NI contributions ended up financing general government expenditure.

He also points out that the ceiling imposed on the two-thirds pension had been frozen for more than two decades after 1981 and it was only in 2004 that the ceiling started to increase according to the cost-of-living adjustment.

The historical background is important to understand the plight of today’s pensioners, he says from behind his green smiling eyes. “Pensioners have been jogging on the spot for years.”

Low inflation that has characterised the past 18 months has not helped either since pensions have remained virtually static.

Mr Mallia says pensioners have seen their purchasing power erode, something even the Prime Minister has acknowledged on various occasions.

Although the proposed pension reform unveiled last week in the form of a White Paper touches on these concerns, Mr Mallia is not convinced the suggestions will make a substantial difference to today’s pensioners.

He says the current national minimum pension for married individuals is €135 per week and €119 per week for singles. The married rate works out at four-fifths of the minimum wage while the single rate is two-thirds the minimum wage.

The reform proposes changing this system to a guaranteed national minimum pension equivalent to 60 per cent of the median income.

Without entering into the merits of the mathematical formula, Mr Mallia says the proposed revision will see pensions increase by an average of €20 per week.

“This formula was introduced in 2007 but it only applied to widow and disability pensions. We have been arguing since then for the median income calculation to apply to all pensioners.”

The national minimum pension for married individuals is €135 per week and €119 per week for singles

But while he welcomes the latest move, Mr Mallia says he fails to understand why it will be phased in over a 12-year period. A 65-year-old pensioner will only receive the higher minimum income in 2027, he adds.

The alliance wants the phasing-in period to be reduced so as not to keep pensioners living in poverty for longer.

Another important issue is the maximum pensionable income, a ceiling that caps the two-thirds pension. This is linked to an average of the wage a pensioner would have had before retirement.

The current system foresees two calculations. Those born in 1961 and before earn two-thirds of €17,842, which works out at €228 per week. Those born in, and after 1962, earn two-thirds of €21,749, or €278 per week.

Since 2004, the maximum ceiling has increased annually with the full cost of living but Mr Mallia says an injustice was perpetrated for more than two decades after the two-thirds pension was introduced between 1979 and 1981.

“In 1981, the ceiling was tied to the President’s salary but the ensuing wage freeze until 1987 and the subsequent decision to keep a fixed cap stifled pension growth,” he points out.

Had the capping taken its natural course and raised with the cost of living since 1981, today’s ceiling would have touched €32,000, Mr Mallia adds.

The alliance wants the ceiling to be adjusted upward to recoup part of the lost ground but it also wants the different caps to be scrapped.

“The two-thirds pension should be worked out the same for all pensioners irrespective of when they were born because this is creating anomalies.”

There are other issues the alliance will raise during the consultation phase, not least the “injustice” recipients of a service pension have been suffering since 1979.

Prior to the introduction of the two-thirds pension, thousands were eligible for non-contributory public service pensions, UK pensions and other job-related pensions. These are collectively referred to as service pensions and recipients receive a deducted pension as a result of this income.

Mr Mallia clasps his hands and shakes his head. Service pensions are another complex problem and a subject to be dealt with on another occasion, he says.

The requests Mr Mallia speaks of are not new. They have long been made by pensioner groups to improve the situation of existing pensioners.

Income tax cuts do not benefit pensioners and the trickle-down effect of a thriving economy has failed to reach the elderly, he says.

“I ask pensioners to forget the political party they support and put their voices across to safeguard their dignity and standard of living,” Mr Mallia says.

There are some 85,000 pensioners, a veritable force to be reckoned with if they speak with one voice, he adds.

kurt.sansone@timesofmalta.com