The Pensions Strategy Group notes the article titled ‘A stronger pension system?’ by Micheal Brigulio (July 13). The report by the group is open for consultation. The group will embrace recommendations that contribute to the strengthening of Malta’s pension system and thanks Brigulio for his contribution.
The group identifies a number of important points that merit elaboration. Planning for pension reform is no simple task. It encompasses the period from when a person starts his journey in the labour market to retirement: a period of 49 years – nearly half a century. This is far too long a period of time to assume that projections made today will materialise as planned.
The group believes that establishing a pension system that responds to long-term economic, social and demographic changes as they arise is far better than one fixated on a specific set of parametric reforms directed to address issues 50 years down the road that are likely to have been misjudged.
This does not mean that an unavoidable challenge is postponed for future administrations. Assumptions do change. The EUROPOP demographics assumptions underpinning the projections are different from the same Eurostat recommendations underpinning the 2010 Strategic Review.
Today Eurostat projects a growing population for Malta whilst in 2010 it projected a dying population.
An evolutionary approach to reform is appropriate for it allows assumptions made to be challenged, impacts tobe assessed, and interventions where necessary to be taken. This will be achieved through five-year reviews whilstproviding individuals with a 15-year window to prepare for arising reforms.
The statement made with regard to pensions and EU citizens living in Malta are inaccurate and need clarifications. Directive 98/49/EC provides for the protection for the portability of supplementary pension schemes. Malta transposed this directive in local legislation and will transpose as appropriate Directive 2014/50/EC which supplements it and recently introduced.
Social security pensions in the EU are regulated by EU Regulations 883/2004 and 987/2009 on the coordination of social security. Under these regulations a person who moves from a member state to another member state has his rights safeguarded and a pension paid according to the number of social security contributions paid under a state’s scheme.
These regulations provide that in the event that a person does not satisfy the minimum requirements to be eligible for a pension from Malta, an aggregation process is carried out, aggregating all insurance records from all member states where that the person would have worked in and a pro-rata pension is paid accordingly. This relates to both Maltese and EU citizens in the same manner since an underpinning principle is equal treatment. Malta applied these regulations since its accession to the EU.
An evolutionary approach to reform is appropriate for it allows assumptions made to be challenged
An EU citizen who contributed towards the Maltese system and is eligible for a pension will have his pension rights safeguarded and start receiving a pension from Malta once that person reaches the Maltese statutory retirement age.
Moreover, Malta exports its pensions to any country in the world, so that a person can inform the Department of Social Security about the country, bank name and account number where he/she wants the pension to be paid (a process made simpler by SEPA), and the pension is paid accordingly.
Given that the proposed reforms concern the Maltese pension system, and EU citizens living and working in Malta are part of the Maltese system, they are affected by the strategy and have not been left out.
Third country nationals working in Malta pay social security contributions on the basic salary earned in the same manner as Maltese and EU citizens. Similarly they qualify for a Maltese pension if they meet the entitlement criteria.
In the event that the third country national was employed in one or more EU member states, the same rules as for EU citizens apply by means of another EU Regulation 1231/2010. One must also not forget that Malta has a number of bilateral agreements with non-EU states which also apply similar rules to EU Regulations 883/2004 and 987/2009.
The above mentioned regulations which introduce mechanisms of coordination of member state social security systems are aimed at removing obstacles to free movement of persons, since they promote equal treatment, protect pensions rights, necessitate exportability of pensions, and require aggregation in case the pensioner does not satisfy the minimum period required.
The Pensions Strategy Group believes that portability of pensions and protection of pension rights of persons moving from one member state to another are adequately safeguarded by these EU regulations.
The group agrees with the statement on the importance of financial education. Only in this way can people become more understanding of the importance of saving for one’s retirement and more knowledgeable of the increasingly sophisticated financial instruments.
The recommendation for the setting up of a Commission for Financial Literacy and Retirement Income is one of the important recommendations made by the group.
David Spiteri Gingell is a member of the Pension Strategy Group.