Updated 12.41pm - Second-pillar pension task force to be unveiled
Prime Minister Joseph Muscat this morning made it clear that the government was "not moving silently towards second-pillar pensions" whereby the employers and the workers would each contribute to a fund, over and-above the State pension.
Dr Muscat was addressing a pensions reform conference organised by the Institute of Financial Services in collaboration with the Times of Malta.
Finance Minister Edward Scicluna subsequently said that a voluntary second-pillar pension task force had now been set up and would shortly be unveiled.
He however excluded the possibility of mandatory second-pillar pension schemes, saying such measure was not necessary at the moment as the increase in work participation rate and the drop in unemployment was "defusing the pensions time bomb".
Prof. Scicluna added that if mandatory second-pillar pensions were to be introduced right now it would negatively effect worker participation rate.
Dr Muscat confirmed that the government was willing to look at voluntary schemes.
"Workers should be able to depend on the State pensions to have a decent income," Dr Muscat said. The Prime Minister warned that countries which had enacted mandatory second-pillar pensions, such as Poland and Chile, had to partially reverse such measures or take drastic remedial decisions as the plan did not yield the desired results.
"I am not going to allow the country to make the same mistake," he said.
In his address the Prime Minister reiterated his assurance that government was not planning to raise retirement age, and pledged to raise state pensions further following the increase introduced in the last Budget, which affected 12,000 people.
Dr Muscat hailed Malta's economic performance and said that economic growth had exceeded five per cent for the fifth successive quarter while employment had exceeded the European Commission's forecast.
He added that the recommendations presented last year by the Pensions Reform Strategy Group had been welcome by all stakeholders, including the EU. The group had concluded that there was no urgent need to raise retirement age and introduce drastic measures due to an increase in the female participation rate and a drop in unemployment.
"As a matter of fact, pensions is no longer being listed among the country specific recommendations issued by the European Commission," Dr Muscat said.
Social Policy shadow minister Paula Mifsud Bonnici questioned if the government still wanted to set up a task force to explore measures which would encourage voluntary second-pillar pensions.
While welcoming the Finance Minister's announcement last March, Dr Mifsud Bonnici noted that no further announcements had been made since, fuelling speculation that the government had backtracked on the matter.
She called on the government to start exploring second-pillar pensions, saying this was the best approach to address the "pensions ticking time bomb".
While welcoming the introduction of incentives to encourage third-pillar pensions, she said these incentives were very modest and did very little to encourage private pensions take up.
She warned that the existing State pensions model would no longer be sustainable after 2040.