The editorial ‘Pension reforms short of expectations’ (October 23) is based on a number of erroneous conclusions and misrepresentations. The Budget 2016 speech made it clear that the measures introduced on the reform of the pension system are the start of the implementation process following the government’s consideration of the commendable work carried out by the Pensions Strategy Group. Further reform initiatives will be announced across the course of 2016 and others will be launched in subsequent budgets.

This administration has placed the fight against poverty as one of its cardinal objectives. A national strategic policy for poverty reduction and for social inclusion was launched by my ministry at the start of this year. The strategy presents over 90 recommendations spanning employment, education, social security and welfare, health, and culture to be implemented by 2024. The process of implementation is underway.

The Pension Strategy Group in its report to government proposed that the pension system should be leveraged as a policy instrument that should complement other measures directed to reduce poverty. The group underlined that a ‘big bang’ implementation as at 2016, where all persons born in 1961 and after are placed on the Guaranteed National Minimum Pension (GNMP), would cost the exchequer a cumulated cost of €377.8m by 2026 and stated that this “would place substantial pressure on the pension system as well as national finances”.

The government agrees that the pension system has an important role to play in reducing poverty in Malta and that measures introduced should be fiscally prudent and sustainable

The group recommended that implementation should be phased targeting initially what it considered to be the most vulnerable cohort of elderly persons – those born in 1941 and before; and thereafter introduced incrementally.

The government agrees with the group that the pension system has an important role to play in reducing poverty in Malta and that measures introduced should be fiscally prudent and sustainable.

It, however, elected for a different approach to that presented by the group given that targeting specific age cohorts one at a time means that the positive impact of each measure would take time to perculate across all current or future pensioners. It is the government’s commitment, in coming budgets, to continue with the phasing in of this measure until all pensioners on a minimum pension would be brought at par with the thresholds established by the guaranteed national minimum level.

Government is very much conscious of the needs of all pensioners, not only those on a minimum pension or those pensioners who would benefit from the recently announced reduction in income tax. These also include all pensioners with a pension higher than the minimum pension but lower than the tax-free threshold, and also those on an invalidity pension and on the means-tested old-age non-contributory pension.

The strategy group presented recommendations with regard to changes concerning these pensioners apart from those on an invalidity pension who nonetheless are in government’s thoughts as well.

The government is currently assessing possible policy instruments which can be introduced in the very near future for all of these pensioners.

The government disagrees with the statement that the maximum pension income of pensioners should be the same for all categories of pensioners.

Is the Times of Malta arguing that those persons who were born on or after 1962 (45 years and younger as at January 1, 2007) who were placed on a new social contract where their contributory period was increased to 40 years, retirement age increased to 65 years of age, the calculation formula of their pensionable income established as the best 10 years out of the last 40 years, and that they pay a 10 per cent contribution on the higher capped salary, should be placed on the same pension regime as persons who retired at 61 years, who had to reach a 30-year contribution history for entitlement to a full or maximum pension, whose pension was calculated on the best three consecutive years out of the last 10, and who would not have contributed to a higher maximum pensionable income?

If this is truly what the Times of Malta is militating for, then it will be a party to a great injustice to all those persons who on January 1, 2007 were placed on a far more onerous pension regime than that enjoyed by today’s pensioners.

Much has been said and written on the service pension. It is a fact that the issues related to the service pension surfaced as a result of the pension reform in 1979 when a new earnings-related pension regime was introduced. Through this reform the Labour government at the time ensured that those on a service pension would continue to retain the same rights they enjoyed under the old regime.

Despite the fact that the PN, in opposition at the time and for many years later accused the then Labour government of creating injustices, once in government (for over 25 years) it did little to reshape the pension system. The situation has became more complex as the PAYG pension system matured over time.

The Sant administration in 1996 initiated a number of incremental reforms (which were only continued by the PN administration of 2008) and this administration will continue to do so over this term of the legislature and beyond.

It is, however, simplistic to expect that this sensitive issue can be resolved by the strike of a pen although it is pertinent to remind the Times of Malta and all that service pensioners (when adding their pension with the social security pension they receive) are in the vast majority of cases receiving pension income which exceeds the highest rate of social security pension in Malta paid to those onone pension.

The editorial unfortunately quotes wrong figures related to poverty. According to the SILC 2013 result (based on 2012 reference data) there were 99,360 persons (24 per cent) at risk of poverty or social exclusion. On the other hand, according to the SILC 2014 (based on 2013 reference data) there were 99,038 persons (23.8 per cent) at risk of poverty and social exclusion. So how the editorial concluded that last year (actually it was 2013 since SILC 2014 was based on 2013 data) the risk of poverty went up by four per cent is baffling. Quite the contrary, these figures clearly show that with the change in government in 2013 and the very first measures introduced by the new government at the time, the current administration has stopped the increase in poverty and has slowly started to turn the tide.

In this context, the main relative poverty indicators are the ‘at-risk-of-poverty’ and the ‘material deprivation rates’. It is pertinent to underline that these indicators do not take into account ‘benefits in kind’ – such as free childcare, free schooling (from early years to university), free healthcare, etc. – and an honest discussion and evaluation of poverty in Malta is not complete if ‘in-kind-benefits’ are simply ignored.

This does not in any way lessen this government’s commitment to the values and principles of social justice. This government will continue to pursue political and economic policies which will protect the poor and the vulnerable persons in Malta’s society because for this government poverty is not a perception but a reality we are fighting through a series of policy measures aimed at incentivising work and education, the biggest two enemies of poverty.

Claudia Cuschieri is communications coordinator at the Ministry for the Family and Social Solidarity.

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