Updated, see PN reaction below - Plans for a voluntary second-pillar pension scheme are being drawn up by the government which will soon appoint a task force to suggest fiscal incentives for such a purpose.
Finance Minister Edward Scicluna made this announcement during a special joint session of the Malta Council for Economic and Social Development and the Malta EU Action Steering Committee.
Prof. Scicluna presented Malta’s plans to meet the country specific recommendations issued by the European Commission, as part of the national reform programme. The plan is set to be presented to the Commission next month, following the approval from Cabinet.
While first-pillar pensions are based on a pay-as-you-go system through which the current workforce finances current pensioners, the second-pillar is a funded pension plan whereby the individual and the employer puts aside money throughout the years of employment. To date, the government has resisted calls to introduce mandatory second-pillar pensions, saying that thousands of families cannot afford to dedicate another significant part of their income towards a pension fund.
In his address the finance minister spoke about the long-term sustainability of public finances, noting that pensions were an integral part of this challenge.
He said that the sustainability of pensions was not so alarming as it was made out to bea few years ago saying that the “red light has become orange”, since more women are in employment and the working population has increased.
Nevertheless he said additional measure would be needed to keep pensions sustainable, like third-pillar or private pensions which were introduced last year. In this respect he noted that the feedback was very good, to the point that the government was open to consider further incentives to increase their take up.
“This government will soon announce a task force whose remit will be to consider the introduction of voluntary second-pillar pensions, in line with the announcement made in the last Budget,” the finance minister said.
“There may be fiscal incentives whereby employers and unions would be encourage to consider such option if there is a mutual agreement,” he added.
Touching on the economy he lauded last year’s “exceptional” 6.3 per cent economic growth, but warned that the country should not be carried away with this success.
“Reality is that government’s revenue has not reached some particular benchmark which would permit a bigger distribution of wealth,” Prof. Scicluna said.
In a reaction, the Nationalist Party said it welcomed the government's 'change of heart' on the second pillar pension system.
In the context of the need to ensure the sustainability of our pension system in the context of the challenges posed by an ageing population, the Opposition welcomes the Government’s decision to follow the Opposition's proposal and its consequent change of heart and looks forward to a fruitful discussion on the matter.- Mario de Marco
"The Opposition had formally called for the consideration of the second pillar pension in its Pre-Budget Document published last year and reiterated such call on a number of occasions afterwards. This position was taken following an analysis of the recommendations that had already been made by the European Commission and the Pensions Working Group," shadow minister and PN deputy leader Mario de Marco said.
"Regrettably, the government had been taking a very populist approach to the responsible call for a second pillar system, without offering any sound alternatives to ensure the sustainability and adequacy of pensions for future generations.
"However, in the context of the need to ensure the sustainability of our pension system in the context of the challenges posed by an ageing population, the Opposition welcomes the Government’s decision to follow the Opposition's proposal and its consequent change of heart and looks forward to a fruitful discussion on the matter."
FINANCE MINISTRY: PN STATEMENT 'BIZARRE'
The Finance Ministry said the Nationalist Party’s statement was bizarre.
"The working group which was mentioned by the Finance Minister was promised in the 2016 Budget and talks about 'fiscal benefits for employers who promote private pension schemes on a voluntary basis'.
"The Second Pillar Pension Scheme, as proposed by the Nationalist Party, is a national obligatory scheme which would oblige both the employer and employee to a second national insurance contribution. The PN’s proposal means further burdens on employers and employees," the ministry said.