A leading pensions association believes it is free healthcare,not the pensions system, thatis unsustainable.
Pensions have made headlines this past week, with both the European Commission and a government-appointed working group saying the existing system is unsustainable over the long-term.
But the National Association of Service Pensioners believes that if pensions are unsustainable, it is because national insurance contributions are being used to fund healthcare.
“It’s universal free health care that is unsustainable not our existing pension system,” association president Albert Cilia Vincenti said.
“Since 1979, some of the workers’ NI contributions have gone to funding other sectors, most notably healthcare, and it’s that which is rendering the existing system unsustainable.”
A Health Ministry spokesman defended expenditure in health care, saying the government was committed to free healthcare for all. He pointed out that it was the elderly who benefited most from such expenditure.
Under the Constitution, all money raised by the government is paid into one single consolidated fund.
Prof. Cilia Vincenti insisted that pensions’ contributions should be ring-fenced, managed as an investment fund and not spent on other welfare issues. He cited a 2005 pensions working group report that had said much the same.
“But that never happened and since then about €350 million have been siphoned off NI contributions to fund health services instead of pensions.”
He argued that it was time Malta faced some home truths and realised it could not have its cake and eat it.
“If we want a welfare state with healthcare and stipends free for everyone, even the rich, then we’re going to have to start paying more tax.”
The suggestion is unlikely to prove popular but Prof. Cilia Vincenti said Maltese taxpayers had so far been spared property taxes or high NI contributions. Maltese workers fork out 10 per cent of their salaries in such payments.
The Commission report, which first sparked renewed debate on pensions, was criticised yesterday by the European Trade Union Confederation, which accused the report of ignoring pensions’ social purpose at the expense of micro-economic considerations.
It called for governments to fortify first pillar pension regimes before automatically turning to private pension schemes as a solution. Maltese trade union confederation Forum is part of the ETUC.
Recent calls for the introduction of a secondary, mandatory private pension structure rankled Prof. Cilia Vincenti and his association colleagues, who are battling the government over private pensions of their own.
Private pension schemes similar to those now being recommended previously existed in Malta but were outlawed by the government in 1979.
Some 6,000 workers paid into such schemes, believing that upon retirement they would receive a second private pension to supplement their state one. That never happened, with workers’ private pensions instead being sub-tracted from their main two-thirds pensions.
The European Commission has deemed this unacceptable and told the government to stop reducing such workers’ pensions, something the government has said it will not be doing.
Pensioners caught in this trap had been misled by the government, Prof. Cilia Vincenti said.
“The Nationalist Party’s 2008 electoral manifesto promised the issue would be resolved but, instead, the government is fighting the EU on the matter. And now, to add insult to injury, we’re discussing reintroducing such pensions. Shouldn’t the government address the previous injustice first?”