At 20, John is unlikely to bother about the size of his pension 45 years down the line.

He is on the cusp of landing his first job after finishing university and for him pensions are his grandparents’ concern... and maybe his parents.

But demographic statistics indicate that John has plenty to worry about because by the time he becomes a pensioner at 65, there will be fewer workers contributing towards his pension.

The State pension he will receive will not be enough to maintain a decent quality of life, an issue his grandparents are already having to contend with now.

Economists have a name for John’s lack of awareness over his future: pensions’ myopia.

Sociologist Michael Briguglio says numerous studies have shown that people not only lack awareness about their future as pensioners but are unwilling to engage in the subject.

It is for this reason that he believes the State should adopt “a paternalistic” approach when finding solutions to the pensions problem.

“People may be oblivious but unless the government introduces solutions to make pensions sustainable in the long term, society will be faced by a time bomb in the future,” he says.

Dr Briguglio argues that one of the solutions is the introduction of a mandatory work-related private pension, known as the second pillar, to which both employees and employers will contribute. He says repeated studies have shown that unless it is compulsory very few people will choose to participate in a second pillar scheme.

The State pension will not guarantee them a good quality of life

This type of pension had been proposed by the pensions’ reform working group a few years back but was never introduced.

On Thursday, Prime Minister Joseph Muscat again shot down the proposal, insisting the model would not be affordable for thousands of families and the private sector.

Dr Briguglio acknowledges the second pillar has its defects but insists it is the best option to ensure the sustainability of the system in the long term. He argues it can be introduced with certain opt-outs for those who take career breaks to study or parents who stop working to take care of their children.

“It may not be perfect but, with some flexibility, the second pillar pension can work. The government will have to step in and support those who cannot afford it because this is reality that cannot be ignored.”

But for Joe Farrugia, director general at the Malta Employers’ Association, introducing the second pillar pension will reduce the spending power of families and increase costs for employers.

He argues for giving people the freedom to choose how best to take care of their future.

“Some people invest in property as a guarantee for their future and we think they should be allowed to determine the best way to finance their pensions,” Mr Farrugia says. He argues the government should provide adequate incentives to encourage people to save.

However, he insists on the importance of an awareness and education campaign for young people like John.

“The young generation has to understand the importance of saving for the future because the State pension will not guarantee them a good quality of life. We need to have a savings culture rooted in the younger generation,” he says.

The Opposition has asked the government to engage in a debate on the introduction of a second pillar pension scheme. However, despite showing keenness to adopt a bipartisan approach to pensions, the government remains reluctant to consider the option.

Tax incentives were introduced last year to encourage people to take out private pensions. Many questioned the adequacy of the incentives offered.

Dr Briguglio believes the measure only benefits those who afford the monthly payments of a private pension. But he welcomes the Prime Minister’s statement that the status quo is not an option, especially when the current system fails those who take up multiple part-time jobs to make ends meet.

“Something has to be done but we definitely have to save more,” Dr Briguglio says.

It is unlikely John will be reading this article, more so listening to the problems that await him in the future. Any savings John will be making will probably go to buy a new car.

Did anybody mention pensions?

kurt.sansone@timesofmalta.com