David Curmi: “You have to make your money work in the most efficient manner.” Photo: Matthew Mirabelli

Maltese people are saving less, spending more and not planning for their pension, risking a retirement during which they will be unable “to live with dignity”, the head of a leading insurance company says.

David Curmi, CEO of MSV Life, said a national education campaign was needed “starting now”.

He said there was need to educate people and to encourage them to invest “in stocks, shares and funds”, not just in property. He also proposed raising the retirement age, linking it to life expectancy.

“Every country has almost done this and we are not special. Retirement age cannot be fixed at 61,” he said.

“In Malta, life expectancy is over 80, which means that a person’s retirement life is going to be as long as their working life. Which is frightening when you think about it because for long years you have to live off a pension of about €1,000 a month.”

Mr Curmi added that life expectancy increases up to about four hours a day and being born now stand a “good chance” of living up to 100. If people do not save, they “will not have a dignified life in retirement”.

He said Malta was one of the few countries in Europe that still did not encourage voluntary savings.

Some countries, such as Chile and Singapore, forced people to save for their pensions.

‘People will get a shock at age 61’

Mr Curmi told Times of Malta that although the government had now done its bit by introducing the Bill for the third pillar pensions in Malta, “simultaneously we should be educating our people in a nationwide campaign” on how to start saving for their retirement or they “will get a shock”.

He described the proposed law as “at least” a very small step forward but the tax incentives had to be increased gradually to make them more meaningful.

However, he quipped, politicians did not think about it because “they’re only elected for five years”. One of “the biggest problems” in Malta was financial literacy, which in his opinion was very low.

“Ideally, we should be starting from schools. We should start educating children from a young age: what does it mean to save and how you save and why you perceive it to be risky,” he said.

The most recent Allianz Global Investors’ Pensions Sustainability Index places Slovenia, Malta and Greece as the worst performing European countries.

“In Malta, a lot of people have decided to put away their savings into more illiquid assets, such as property, which is good, but property tends to be a very illiquid asset, so if you need access to cash, you need to liquidate the property and that takes time,” he said.

He said in Malta there were not many reliable statistics on household savings. However, the Malta Financial Services Authority said that the Maltese spent an average of €412 on insurance in 2013, down from €512 the year before.

The EU average is €1,072. “It’s worrying that it went down by 19.5 per cent,” he said.

“Also, insurance penetration –the total spend on insurance divided by the GDP – is down to 2.6 per cent from 3.2 per cent. The EU average stands at 4.5 per cent.

“The difference is in pensions: they have a high rate of saving for pension,” he said.

According to Mr Curmi, the right time to start saving is on “the first day of your first job”. “That is when you should start; €20 a month makes a big difference,” he said. “If you just put your money in the bank, it’s not earning you any money and if you put it under the mattress, it’s worse. You have to make your money work in the most efficient manner,” he said.